Which of the Following Is NOT an Example of Moral

question 15

Multiple Choice

Which of the following is NOT an example of moral hazard in business?

• A) A bank buys risky mortgage securities because they believe the government will provide a bail-out if the investment performs badly.
• B) A firm uses venture capital to speculate in the commodity futures market.
• C) A firm does not hire adequate security protection for its warehouse after it pays for insurance on the property.
• D) Firms with the large debt problems are more likely to apply for bank loans than financially stable firms.

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Definitions:

Quantitative Threshold

A specified numerical limit or benchmark that must be met or exceeded, often used in contexts like financial regulation or performance measurement.

Reportable

Refers to information or actions that must be disclosed to regulatory authorities or in financial statements according to legal or regulatory requirements.

Combined Revenues

The total revenue generated by a group of companies or divisions consolidated into a single figure.

Commercial Substance

A situation where the risk, timing, or amount of the entity's future cash flows changes as a result of a financial transaction.