A Manager's Compensation Plan That Offers Financial Incentives for Increases

question 8

Multiple Choice

A manager's compensation plan that offers financial incentives for increases in quarterly profitability may create agency problems in that:

• A) the managers are not motivated by personal gain.
• B) the board of directors may claim the credit.
• C) short-term, not long-term profits become the focus.
• D) investors desire stable profits.

Distinguish between the roles and rights of disclosed and undisclosed principals in agency relationships.

Identify the mechanisms for creating, modifying, and terminating agency and partnership relationships.

Understand the impact of changes in the unemployment rate on an economy's proximity to the production possibility frontier (PPF).

Grasp the concept of opportunity cost in the context of scarce resource allocation and investment.

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Definitions:

Create Purchase Order

The process of generating a document to officially request goods or services from a supplier, outlining the types, quantities, and agreed prices for products or services.

Make Deposits

The process of adding funds to a bank account, often facilitated by banking or financial software.

Sales on Account

Transactions where goods or services are sold and payment is deferred to a later date, creating accounts receivable.

Create Invoices

The act of generating a document that specifies the amount owed by a customer for goods or services provided.