Which of the following is NOT an example of an agency cost?
A)Paying an accounting firm to audit your financial statements
B)Paying an insurance company to assure that building codes have been met for new construction
C)Paying a landscaping firm to maintain your firm's grounds
D)The cost of designing contracts that satisfy creditors that their concerns will be met

Question

Quizplus · Accepted Answer

Agency costs are expenses related to resolving conflicts of interest between managers and shareholders in a corporation. Examples include monitoring costs, bonding costs, and residual losses. Paying a landscaping firm to maintain your firm's grounds is not an agency cost; it is a regular operational expense unrelated to the agency problem.

Which of the Following Is NOT an Example of an Agency