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3 years ago

Define agency costs, and describe agency costs of financial distress and agency benefits of leverage

Business

1 answer:

Aleks04 [339]3 years ago

5 0

Answer:

In accounting, agency costs are the costs of hiring an agent in order for him/her to act on behalf of a principal. In finance, agency costs are much broader since they imply costs that may appear due to conflicts of interests between the agent and the principal. E.g. a manager who seeks to accomplish short term goals in order to collect a bonus but hurts the long term objectives and goals of the stockholders.

Agency costs of financial distress refers to the costs associated with conflicts of interest that may result in a company being insolvent, specially in the long run. This type of costs are not necessarily related to operating costs, instead they result from management decisions and strategies, e.g. higher cost of capital or debt, or even excessive spending.

Agency benefits of leverage result from stockholders benefiting from the agent's decision to keep equity low, and if needed, obtain financing from debt sources.

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In a command economy, the goods and services that a country produces, the quantity in which they are produced, and the prices at

IrinaK [193]

Answer:

In a command economy, the goods and services that a country produces, the quantity in which they are produced, and the prices at which they are sold are planned by the government

The government plans the goods and services that a country produces, the quantity in which they are produced, and the price at which they are sold.

8 0

2 years ago

Arbitrage is used successfully by many active securities investors. True statements about arbitrage include which of the followi

lakkis [162]

Answer:

It can be a good way to increase portfolio value.

Explanation:

Arbitrage trading involving buying an investment instrument in one market and simultaneously selling it in another. Arbitrage trading takes advantage of unadjusted/ unsynchronized prices (market inefficiency) in different markets. Stock XY may be trading at a price of $45.41 in market A and $45.51 in market B. An investor can buy the stock in Market A and, at the same time, sell it in market B, thereby gaining $0.10 per stock.

Arbitrate trading is a low-risk investment strategy, but its returns could be great. Trades are executed simultaneously, minimizing risk. Rewards are constant. Arbitrate trading is a good way of growing a portfolio due to its low-risk and almost guaranteed profits characteristics.

4 0

3 years ago

What is the eventual effect on real GDP if the government increases its purchases of goods and services by $50,000? Assume the m

Finger [1]

Answer:

a. The real GDP increases by $200,000.

a. The real GDP increases by $150,000.

Explanation:

a. What is the eventual effect on real GDP if the government increases its purchases of goods and services by $50,000?

Eventual effect on real GDP = Amount of increase in government spending * (1 /(1 - MPC)) = $50,000 * (1 / (1 – 0.75)) = $200,000

Therefore, the real GDP increases by $200,000.

a. What is the eventual effect on real GDP if the government, instead of changing its spending, increases transfers by $50,000?

Eventual effect on real GDP = (Amount of increase in government transfers * (1 /(1 - MPC))) - Amount of increase in government transfers = ($50,000 * (1 / (1 – 0.75))) - $50,000 = $150,000

Therefore, the real GDP increases by $150,000.

3 0

2 years ago

You have recently been made a department head of the new regional office. In getting to know your departmental staff, you have n

nignag [31]

Answer:

Democratic leadership style

Explanation:

She can develop a democratic leadership style within her which can help her accomplish her tasks as a manager and also help her inculcate this very leadership style which can be beneficial for her to go higher the ladder in organizations management.

Democratic leadership style would help her show the inexperienced employee some route out to get skilled and follow subordinates to improve work. Collaborative working with the employees provides managers with much needed team dynamics. Also, democratic leadership styles makes managers gather much needed skills which are essential for the leaders of the organization.

5 0

2 years ago

(a) What is the average useful power output of a person who does 6.00×106 J of useful work in 8.00 h? (b) Working at this rate,

netineya [11]

Answer:

(a) 208.33 J/s

(b) 141.12 s

Explanation:

(a) Energy is the rate of doing work.

Work is the product of power and time

Work = Power × Time

Power = Work/time

where work is in joule and time is in seconds

Given that work = 6 × $10^{6}$

Time = 8 h = 8 × 60 × 60

= 28800 seconds

Average useful power = $\frac{6 ×10^{6} }{28800}$

= 208.33 J/s

(b) Given

mass = 2000kg , using g = 9.8 m/s2

Force = 2000 × 9.8

= 19600N

Work = Force × Distance ( considering that Work done to lift his body can be omitted because it is not considered useful output here)

Work = 19600 × 1.5

= 29,400J

Time taken = Work/Power

= $\frac{29400}{208.33} \\$

= 141.12s

≈ 2 Minutes 21 Seconds

At the rate of 208.33J/s, it will take the person 141.12 seconds to lift 2000 kg of bricks 1.50 m to a platform.

5 0

3 years ago