Financial Management: Theory & Practice
15th Edition
ISBN: 9781337248006
Author: Eugene F. Brigham; Michael C. Ehrhardt
Publisher: Cengage Learning US
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Chapter 13, Problem 1MC
Summary Introduction
Case summary:
The product is a software platform that incorporates a wide variety of media devices, including laptops, desktops, digital video recorders, and cell phones. Suppose you decide to start a company (like person S and person M). With these issues in mind, it needed to answer the following questions for potential investors. Once it has set up your business and set up procedures to run it, the plan to expand and ultimately go nationally to other colleges in the region. The main audience is the university's student body.
To determine: The agency relationship and when to begin first operations and whether any agency conflicts exist.
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Check out a sample textbook solutionStudents have asked these similar questions
. What is an agency relationship? When you firstbegin operations, assuming you are the onlyemployee and only your money is invested in thebusiness, would any agency conflicts exist? Explainyour answer.
If you expanded and hired additional people tohelp you, might that give rise to agency problems?
What is an agent, and what is a principal? Whatkinds of situations in companies give rise to conflicts between these two, called agency conflicts?
Chapter 13 Solutions
Financial Management: Theory & Practice
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- Why might a manager focused solely on accounting numbers miss opportunities for future benefits?arrow_forwardWhat is Earning management/creative accounting? How might the monitoring and bonding features of the agency model explain EM/CA?arrow_forwardWhich of the following are characteristics of economic agents?a. They participate in economic events, but do not assume control of the resources.b. They participate in economic events, but not in support events.c. Internal agents are employees of the company whose system is being modeled.d. External agents are not employees of the company whose system is being modeled.e. All of the above describe agents.arrow_forward
- Considering the demand for auditing services, which of the following involves“Managers receiving the full compensation in their employment package for what they are worth”.a. Justice theoryb. Motivational theoryc. Needs of Investors and Creditors theoryd. Principal-Agent theoryarrow_forwardDefine agency problems, and describe how they give rise to agency costs. Explain how a firm’s corporate governance structure can help avoid agency problems.arrow_forwardWhich one of the following statements is TRUE? O a. An example of an agency relationship is when a supervisor hires a forklift operator. b. An example of an agency cost is when the board of directors pays a dividend to shareholders. • c. An example of an agency relationship is when a private individual hires a lawyer to prepare her defense d. An agency cost is the wage required to pay someone who is hired to perform a service. e. The supervisor-emplovee relation between a production line supervisor and a production line operator isarrow_forward
- Discuss some of the agency problems your client might encounter and explain how such agency problems can be resolved.arrow_forwardIntroduction to businessarrow_forwardWhy does an organization need the services of an MAS consultant even if everything seems all right in its operations? What are the distinguishing characteristics of MAS engagements? Explain each.arrow_forward
- 1. What do you think is automation? 2. Why is automation needed? 3. What do you think are the advantages of automation? 4. Do you think there are any risks regarding automation? Motivate your answer. 5. What do you think are the characteristics of that can be automated? Name three. 6. What do you think will the role of the processes accountant/auditor/tax specialist/financial manager be in the feature?arrow_forwardAccording to agency theory: Select one: a. The stakeholders are the principal. b. The management board is the agent. c. The management board is the principal. d. Self-interest plays no role.arrow_forwardWhy are employees considered assets to an organization?arrow_forward
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