Which among the following statements is INCORRECT regarding agency costs? a. The reason for agency problems is conflicts of interest between the stockholders and the management of a firm. b. Agents represent the management; however, their decisions are influenced by their interests in the company. c. A corporate expenditure that benefits stockholders but harms management is an agency cost. d. When confronted with higher agency costs, shareholders resort to replacing the existing management. e. None of the above.
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- What should an organization do if performance measures change? A. Make sure that the manager being evaluated is aware of the measurement change, as this may affect his or her decision-making. B. Make sure that the manager benefits without the corporation also benefitting. C. Make sure that there are significant overriding opportunities for each manager, if the manager is unaware of the change. D. Obtain customer surveys on the change before communicating the change to the manager.Which of the following is/are correct regarding agency costs? 1. Indirect costs occur when managers, acting to minimize the risk of the firm, forego investments shareholders would prefer they take. II. Direct costs occur when shareholders must incur costs to monitor the manager's actions. III. Direct costs occur when managers buy assets considered necessary by the firm's owners. Select one: O a. I, II, and III O b.ll only O c.Il and IIl only O d.lonly O e.l and II onlyagency costs may occur if A. Managers make decisions for their own best interest B. Managers may not attempt to maximize the value of the firm to shareholders C. The board does not properly oversee the activities and decisions of managers D.all of the above
- Agency costs are an integral part of agency relationships. they are a key concern in the shareholder/management relationship in that agency cost results in a reduction in the value of the company because of the administration costs in establishing agencies 2. shareholders view a company that operates as an agent to another company as being more risky,and therefore they are willing to pay less for shares in a company 3. agency costs result in a reduction in the value of the company because management pursues its own interest 4. establishment of agency relationships require extensive legal and contractual agreements, which can be very costly1. Which of the following best describes agency cost?A) Costs involved with any effort to minimize the conflict between the principal's interest and the 2/3.B) Cost incurred by an agent to facilitate the creation of an agency relationship with theirprincipal.C) Cost incurred by a principal to establish an agency.D) Agency costs are irrelevant costs that are not measurable nor recognized in the face of the Financial Statement and is therefore not a cost to a company. in the long-term. 2. Which of the following is a valid reason why Financial Managers should put emphasis on long-term growth rather than short-term profit maximization?A) A manager should focus on profit maximization because it adds to the wealth of shareholdersB) A manager should focus on long-term growth because short-term profit maximization does not add to the wealth of shareholders on the long-term.C) There is no difference between focusing on short-term profit maximization and emphasis on agents interestD) Emphasis…The reduction in profit arising from the actions of managers being self-serving or possible conflict of interest can best be attributed to.…........….….. • A. Agency cost • B. Tangible expense • C. Agency theory • D. Agency problem
- Which of the following statement about management accounting information is incorrect? a. The benefits of providing the information should outweigh the costs. b. It is influenced by organisational structure and size. c. It is only prepared on an ad-hoc basis. d. It is used by senior managers.Q5) Agency costs are _______ costs that are paid to ____ acting on behalf of the principal to minimise the conflict of interests between the two parties. Group of answer choices a) internal, shareholders b) external, shareholders c) internal, managers d) external, managersWhich of the following is an example of the agency problem? a. Managers always invest in projects that have appropriate returns and that will increase shareholder wealth. b. Managers resign when they believe they have not always acted in the best interests of shareholders. c. Managers conduct an acquisition program purely to increase the size of an organisation. d. Managers look for new projects as they want to avoid business risk. Clear my choice
- One reason for the existence of agency problems between managers and stockholders is that: O management is separate from ownership. managers know how to manage the firm better than stockholders. Ostockholders have unreasonable expectations about managerial performance. None of the above.Within the context of financial management, it is important that organizations attempt to align their managers' interests with that of the shareholders. In Chapter 16, Berk and DeMarzo (2020) provide several examples of agency conflict or a conflict between the owners and the management of a firm. Examples of these are: (a) at times managers will take on less (greater) risk than they would if they were the owners of the firm and (b) due to the separation of ownership and control managers are able to entrench themselves within firms and have little risk of being replaced. Provide a few examples of mechanisms that organizations could use to align the interests of both the owners of the firm and its managers.What is one of the ways that accounting is used to direct and control the manager of a corporation? a.Threatening to tell shareholders a mangers income if a manager makes a ‘poor financial’ decision. b.Linking of a mangers performance to a bonus that depends on accounting profit. c.Making decisions based on the accounting information regardless of managerial input. d.Using income smoothing to assure a manager that they can invest in a low risk investment.