Moral Hazard

question 81

Multiple Choice

Moral hazard:

• A) is when the principle has too much authority over the agent.
• B) is when the agent is motivated to pursue their own self-interest.
• C) is when the principle behaves unethically.
• D) is when the agent has the opportunity to unfairly influence the principle.

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Definitions:

Retained Earnings

The portion of net income which is retained by the corporation rather than distributed to its owners as dividends.

COGS

Cost of Goods Sold (COGS) refers to the direct costs associated with the production of goods sold by a company, including material and labor costs.

Gross Margin

Revenue less cost where cost is spending closely associated with production. Stated in dollars or as a percent of revenue. A fundamental measure of a business’s strength.

Net Income

The total profit of a company after all expenses and taxes have been deducted from revenues.