All Else Being Equal, Increases in Firms' Net Worth Result

question 26

Multiple Choice

All else being equal, increases in firms' net worth result in

• A)increases adverse selection problems.
• B)increases moral hazard problems.
• C)increases in capital investment spending.
• D)a greater gap between the cost of internal and external financing.

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Definitions:

Comprehensive Income

All changes in stockholders’ equity during a period, except those resulting from dividends and stockholders’ investments.

Interest Receivable

The amount of interest that has been earned but not yet received in cash or other forms of payment.

Interest Revenue

Income earned from lending money or investing in interest-bearing financial instruments.

Accrued Interest

Interest that has been earned but not yet received or recorded in the accounts.