The Statement Concerning Agency Relationships Between Owners and Managers That

question 33

Multiple Choice

The statement concerning agency relationships between owners and managers that is incorrect is:

• A) One way to reduce potential conflicts between owners and managers is to include bonuses based on profits in managers' remuneration packages
• B) Monitoring is an activity undertaken by or on behalf of management
• C) Owners may want cash dividends from the business but managers may prefer to retain cash for expansion
• D) None of the above is incorrect, i.e., all are correct

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Definitions:

IFRS 3

An International Financial Reporting Standard that details the requirements for financial reporting on business combinations.

Business Combination

The process of merging two or more entities into one, through acquisitions or other means, for strategic, economic, or operational benefits.

Acquisition-Date Fair Value

The valuation of an acquired company's assets and liabilities at their fair market value on the acquisition date.

Voting Equity Interests

Shares or stock in a company that grant the holder the right to vote on corporate matters, like electing the board of directors.