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What is meant by an agency cost or agency problem

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Reference no: EM13274902

1)      What is meant by an "agency cost" or "agency problem"? Do these interfere with shareholder wealth maximization? Why? What mechanisms minimize these costs/problems? Are executive compensation contracts effective in mitigating these costs/problems?

2)      What precautions must one take when using ratio analysis to make financial decisions? Which ratios would be most useful for a financial manager's internal financial analysis? For an analyst trying to decide on which stocks are most attractive within an industry?

 

 

Reference no: EM13274902

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