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The costs of paying the bonus is still an agency cost, [4] but the company will profit from paying this cost so long as the avoided residual cost (as defined above), is greater than the bonus. [21] Another key method by which agency costs are reduced is through legislative requirements that companies undertake audits of their financial ...
Tools used for controlling and improving business processes. Tools used for data consolidation and decision making. Nowadays, management tools have evolved dramatically in the last decade thanks to fast technology advances, so fast that it is difficult to select the best business tools for any situation in any company. [4]
Three types of agency costs can help explain the relevance of capital structure. Asset substitution effect: As debt-to-equity ratio increases, management has an incentive to undertake risky, even negative net present value (NPV) projects. This is because if the project is successful, share holders earn the benefit, whereas if it is unsuccessful ...
Activity-based management (ABM) is a method of identifying and evaluating activities that a business performs, using activity-based costing to carry out a value chain analysis or a re-engineering initiative to improve strategic and operational decisions in an organization.
Following strong initial uptake, ABC lost ground in the 1990s compared to alternative metrics, such as Kaplan's balanced scorecard and economic value added.An independent 2008 report concluded that manually driven ABC was an inefficient use of resources: it was expensive and difficult to implement for small gains, and a poor value, and that alternative methods should be used. [4]
Common examples of this relationship include corporate management (agent) and shareholders (principal), elected officials (agent) and citizens (principal), or brokers (agent) and markets (buyers and sellers, principals). [4] In all these cases, the principal has to be concerned with whether the agent is acting in the best interest of the principal.
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