Agency Costs Occur When Managers Choose the Easiest Form of Financing

question 69

True/False

Agency costs occur when managers choose the easiest form of financing over the value maximizing capital structure.

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Definitions:

Common Shares

Equity securities that represent ownership in a corporation, providing voting rights and a portion of profits through dividends.

Generally Accepted Accounting Principles

The common set of accounting principles, standards, and procedures that companies use to compile their financial statements in the U.S.

Comparability Problems

Issues that arise when attempting to compare financial information due to differences in accounting policies or standards.

Inflation

The velocity at which the aggregate pricing for goods and services goes up, undermining the ability to buy.