According to Agency Theory,contracts That Align the Interests of the Principal

question 29

Multiple Choice

According to agency theory,contracts that align the interests of the principal and agent primarily benefit:

• A) The agent
• B) The principal
• C) Both the principal and the agent
• D) Neither the principal nor the agent

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Definitions:

Credit

An accounting entry that increases liabilities or equity or represents a decrease in assets, also refers to the provision of resources based on trust.

Owner's Capital

The amount of equity a proprietor has in the business, representing the difference between the business's assets and liabilities.

Prepaid Expenses

Expenses paid in advance for goods or services to be received in the future.