The best example of an agency problem is: Lenders disagreeing with hotel owners about dividend payments.
Which of the following is an example of an agency problem?
C) Overconsumption of luxuries leads to non-efficient utilization of resources and hence is an agency problem.
Which one of the following is an example of agency costs?
For example, agency costs are incurred when the senior management team, when traveling, unnecessarily books the most expensive hotel or orders unnecessary hotel upgrades. The cost of such actions increases the operating cost of the company while providing no added benefit or value to shareholders.
Which of the following accurately defines the agency problem?
The agency problem can be defined as a conflict when the agents entrusted with the responsibility of looking after the interests of the principals choose to use the power or authority for their benefits and in corporate finance. It is a conflict of interest between its management and stockholders.
What is agency problem and what are the solutions to this problem?
The agency problem happens when conflicts of interest keep one party from acting in the best interest of another party. By taking specific steps and staying organized, you can minimize the chance of this happening in your business.
What is the definition of the term agency problem quizlet?
The agency problem is a conflict of interest inherent in any relationship where one party is expected to act in another’s best interests. In corporate finance, the agency problem usually refers to a conflict of interest between a company’s management and the company’s stockholders.
What are the two types of agency problems?
We focus on two types of agency conflicts: controlling-minority shareholders conflicts and shareholder-bondholder conflicts.
Which of the following is not an example of agency costs?
Explanation Congruency loss is not one of the 3 main agency costs. The three agency costs are monitoring costs, bonding costs and residual loss.
Which one of the following is an example of an indirect agency cost?
Indirect costs include costs which are frequently referred to as overhead expenses (for example, rent and utilities) and general and administrative expenses (for example, officers’ salaries, accounting department costs and personnel department costs).
What are two types of agency costs?
Types of Agency Costs
There are two broad categories of agency costs. The first arises when the managers use the company’s resources for self-benefits and the second when shareholders spend money to discipline the managers.
What are the 3 agency problems?
Types of Agency Problems
- Managers Vs Owners.
- Creditors Vs Owners.
- Senior management Vs Junior management.
- Owners Vs Other parties.
Which one of these is most apt to be an agency problem?
Which one of the following actions by a financial manager is most apt to create an agency problem? Increasing current profits when doing so lowers the value of the firm’s equity.
What are the causes of agency problem?
The main reasons for the principal-agent problem are conflicts of interests between two parties and the asymmetric information between them (agents tend to possess more information than principals). The principal-agent problem generally results in agency costs that the principal should bear.
Which of the following is an example of a principal-agent problem?
The correct answer is B.
Your roommate shirks her obligation to keep the apartment kitchen clean is an example of a principal-agent problem.
Which of the following is not an ingredient of a principal-agent problem Mcq?
Which of the following is not an ingredient of a principal-agent problem? Conflict of interest.
What is agency problem and agency cost?
Agency costs are the costs of disagreement between shareholders and business managers. Shareholders and managers often find themselves in disagreement about the best moves a company can make, and this is known as the “agency problem.” Costs stemming from agency problems are agency costs.
Which of the following is the best example of the so called agency problem or agency costs in a large corporation?
The Enron Scandal
One particularly famous example of the agency problem is that of Enron. Enron’s directors had a legal obligation to protect and promote investor interests but had few other incentives to do so.
Which of the following is not true regarding agency theory?
Answer and Explanation: The correct answer is C) Few agency relationships between parties may be defined or governed by accounting numbers.
Which of the following should be the most important goal of a firm?
The main objective of firms: profit maximisation
The first and most important objective of any firm is to maximise its profit. The basic profit calculation is the total revenue minus the total cost.
What are the types of agency relationships?
The most common agency relationships are: Buyer’s Agency; Seller’s Agency; Dual Agency.
The scope of an agent’s duty to the principal is determined by:
- the terms of the agreement between the parties; and.
- extent of the authority conferred and.
- the fiduciary obligations to the principal.
What is an agency relationship in business?
It is a fiduciary and consensual relationship between two persons where one person acts on behalf of the other person and where the agent can form legal relationships on behalf of the principal. It may be a business or personal relationship.