Which of the Following Does Not Represent an Agency Cost

question 25

Multiple Choice

Which of the following does not represent an agency cost resulting from the separation of ownership from control of the firm?

• A)The expense of providing management with bonuses based on profitability.
• B)The cost of a company director taking a business trip to Hawaii with no potential benefit to the company.
• C)The cost of a staff Christmas party designed to enhance staff morale.
• D)The cost of monitoring the activities of management to keep track of its expenditures and decisions.

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Definitions:

Retroactive Interference

A phenomenon in memory where newly learned information interferes with the recall of previously learned information.

Ego

In psychoanalytic theory, the part of the personality that mediates between the demands of the id, the superego, and reality.

Superego

In psychoanalytic theory, the part of the personality that acts as a moral center, enforcing societal rules and standards.

Encode

The process of converting information into a form that can be stored in memory, such as transforming a visual image into a memorable experience or a thought into language.