LEGITIMACY THEORY Definition

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LEGITIMACY THEORY posits that businesses are bound by the social contract in which the firms agree to perform various socially desired actions in return for approval of its objectives and other rewards, and this ultimately guarantees its continued existence.

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DEMUTUALIZATION refers to the de-mutualizing of an insurance company. The proceeds from such an event are normally distributed to the policyholders in the form of cash, shares, or a combination thereof in the surviving entity.

SALES DISCOUNT is a reduction in the selling price usually as an inducement to consummate a sale. Sales Discount is on the income statement as a deduction from Gross Sales to get Net Sales.

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