A Manager Under-Investing in Projects That Are in Shareholder's Best

question 31

Multiple Choice

A manager under-investing in projects that are in shareholder's best interests but which may reduce the manager's own bonus payment, is classed as which type of agency cost?

• A) Loss from a poor decision
• B) Monitoring cost
• C) Loss from incongruent goals
• D) Contracting cost

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Definitions:

Sustainable

Refers to development or practices that meet the needs of the present without compromising the ability of future generations to meet their own needs.

IFRS

Rephrased: The International Financial Reporting Standards, a global framework for financial reporting, utilized by companies for the preparation of financial statements.

Net Realizable Value

The estimated selling price of goods, minus the cost of their sale or disposal, representing what a company can expect to receive.

Replacement Cost

The current cost of replacing an asset with a new one of similar kind and quality.