Question

Which of the following statements is CORRECT?

A. Firms in highly competitive industries are more likely to consciously exercise "social responsibility" than are firms in oligopolistic industries.
B. Corporations and partnerships have an advantage over proprietorships because a sole proprietor is exposed to unlimited liability, but the liability of all investors in the other types of businesses is more limited.
C. A good goal for a firm's management is maximization of expected EPS.
D. Most business in the U.S. is conducted by corporations, and corporations' popularity results primarily from their favorable tax treatment.
E. One example of an agency relationship is the one between stockholders and managers.

Answer 1

The correct answer is E. One example of an agency relationship is the one between stockholders and managers..

Step-by-step explanation:

Agency theory is a business technique by which a person or company (the principal) asks another person (the agent) to perform a certain job on their behalf. For an agency relationship to exist, the agent must be authorized by the principal to sign, modify or cancel contracts with third parties on behalf of the principal.

In a way, it is a measure of business representation with perfectly legal validity by which it is compatible to act by separating the property of the company and its control or management on multiple occasions, thanks to the fact that the agreement, despite being carried out by the agent, will have legal and real validity as if the principal had done it in the first person.For example, there are companies that for different reasons benefit more from having an external company for the transport of their goods instead of doing that task for themselves.

Another common example of this type of agency relationship is that maintained by the shareholders of a company and its managers.