An Example of an Agency Cost Is

question 81

Multiple Choice

An example of an agency cost is:

• A) a manager turning down a value-contributing project because of its risks.
• B) a manager expensing a lavish dinner on the company expense report.
• C) a manager using too little debt within the firm's capital structure because of the additional risk associated with debt.
• D) all of the above.

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Definitions:

Prior Period Adjustment

A correction of errors in previously issued financial statements to reflect accurate past financial information.

Retained Earnings

Profits that a company has chosen to reinvest in the business rather than distribute to shareholders as dividends.

Earnings Per Share

A financial ratio representing the portion of a company's profit allocated to each outstanding share of common stock.

Net Income

The total earnings of a company after subtracting all expenses and taxes from total revenue, representing the company's profit.