An agency relationship exists when one party delegates:
A) decision-making responsibility to a second party.
B) financial responsibility to employees.
C) strategy implementation actions to functional managers.
D) ownership of a company to a second party.

Question

Quizplus · Accepted Answer

An agency relationship exists when one party delegates decision-making responsibility to a second party, known as the agent. The agent is then expected to act in the best interest of the principal, the original party who delegated the responsibility. This relationship is common in business transactions where individuals or firms hire agents to fulfill tasks on their behalf.

B, C, and D are not accurate definitions of an agency relationship. Financial responsibility and strategy implementation may be delegated, but alone do not constitute an agency relationship. Ownership of a company is a transfer of ownership, not a delegation of decision-making responsibility.

An Agency Relationship Exists When One Party Delegates