Chapter 10, Problem 1Q

Match the statement concept of category A to category B. And explain their significant relationships Category A I.Agency theory II.Contingency theory III.Bargaining theory IV. Investment theory V. Residual claimant Category B 1. Organized sector 2. No single best way 3. Presence of contracting scheme 4. High attributes 5. Factors of production

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 only

Agency costs are best defined as: O The cost of conflict between the banks and shareholders * O The cost of conflict between the creditors and shareholders O The cost of conflict between the board of directors and creditors The cost of conflict between the board of directors and shareholders

Stakeholders include any one who has financial interest stake or claim in an organization and or what it does. Select one: True False

What is the common agency problem faced by shareholders? Describe TWO (2)situations in which stockholders can ensure that management’s and stockholders’interests are aligned?

Any situation where a potential conflict can arise between the firm's owners and its managers is referred to as a(n): Group of answer choices organisational problem. compensation issue. agency problem. personnel conflict. control issue.

Explain the principles of agency theory and discuss the ethics of directors being able to decide their remuneration, albeit through a remuneration committee.

Which of the following is sometimes called the talent bench? a. Conflict management O b. Succession planning O C. Performance appraisal O d. Training and development

Which statement best describes the essence of the Agency Problem?   Shareholders allocate decision-making authority to the managers, who might act dishonestly or guard their own self-interest.    Managers and shareholders always have aligned interests and goals.   Managers always act in the best interest of shareholders.   Shareholders retain all decision-making authority.