Which of the following statements is correct?
A)Agency costs can be minimized by separating decision management from decision control.
B)Specific internal accounting procedures,such as standard costs,aid in decision management.
C)For decision management,most managers prefer accounting numbers.
D)Departments and companies with lower stock turns are using their capital more efficiently by limiting the number of times inventory is replaced during the period.
E)All of the choices are correct.

Question

Quizplus · Accepted Answer

Agency costs refer to the cost incurred by a firm to mitigate conflicts of interest between different stakeholders. By separating decision management from decision control, the principal can delegate decision-making authority to a trusted agent while retaining control over decisions that affect their interests. This reduces the risk of opportunistic behavior by agents and, therefore, minimizes agency costs. The other options have either incorrect or incomplete statements.

Which of the Following Statements Is Correct