The "Agency Problem" Arises When

question 51

Multiple Choice

The "agency problem" arises when:

• A) Owners manage the company on their own behalf.
• B) There is no separation of ownership and control in a company.
• C) Managers act in their own interest, rather than in the interest of shareholders.
• D) Shareholders act in their own interest, rather than in the interest of the board.

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Definitions:

Receivable Turnover

A financial metric indicating how efficiently a company collects revenue from its credit customers by measuring the number of times average accounts receivable are collected during a period.

Inventory Turnover

A ratio showing how many times a company's inventory is sold and replaced over a specific period, indicating the efficiency of inventory management.

Tax Rate

The percentage of income or value of a good, service, or asset collected by the government as tax.

Operating Expenses

Costs associated with the day-to-day operations of a business, excluding the cost of materials and direct labor.