Which of the Following Is True About Outcome-Oriented Principal-Agent Contracts

question 17

Multiple Choice

Which of the following is true about outcome-oriented principal-agent contracts?

• A)The principal must monitor with little cost what the agent has done.
• B)When profits drop, agent's compensation goes up.
• C)Agents do not demand compensating wage differentials in such contracts.
• D)Agents face minimal risks in such contracts.
• E)The interests of the company and employees are aligned in such contracts.

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Definitions:

Net Income

The total profit of a business after all expenses and taxes have been deducted from total revenue.

Closing the Revenue

The process of transferring the balances from the revenue accounts to permanent accounts at the end of an accounting period.

Building Account

An account used to track the costs associated with constructing a building over a period of time.

Original Investments

Original investments refer to the initial amount of money invested in an asset, project, or enterprise by its owners or shareholders.