Examples of agency cost are: A. The total dividends paid to shareholders over th
ID: 2730647 • Letter: E
Question
Examples of agency cost are:
A. The total dividends paid to shareholders over the lifetime of the firm.
B. The costs that result from default and bankruptcy of the firm.
C. Corporate income subject to double taxation.
D. The costs of the conflict of interest between stockholders and management.
E. The total interest paid to creditors over the lifetime of the firm.
A. The total dividends paid to shareholders over the lifetime of the firm.
B. The costs that result from default and bankruptcy of the firm.
C. Corporate income subject to double taxation.
D. The costs of the conflict of interest between stockholders and management.
E. The total interest paid to creditors over the lifetime of the firm.
Explanation / Answer
Answer: D. The costs of the conflict of interest between stockholders and management.
Because The relationship between stockholders and management is called an agency relationship. Such a relationship exists whenever someone (the principal) hires another (the agent) to represent his or her interests. In all such relationships, there is a possibility of conflict of interest between the principal and the agent. Such a conflict is called an agency problem.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.