Equity Contracts

question 14

Multiple Choice

Equity contracts

• A)are claims to a share in the profits and assets of a business.
• B)have the advantage over debt contracts of a lower costly state verification.
• C)are used much more frequently to raise capital than are debt contracts.
• D)are not subject to the moral hazard problem.

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Definitions:

Ultimate Pension Payments

The total amount of pension payments that will be made to an employee under a defined benefit pension plan over the course of their retirement.

Service Cost

The actuarial present value of benefits earned by employees in the current period under a defined benefit plan, included in pension expense.

Interest Cost

The cost incurred by an entity for borrowing funds, typically reflected as an expense in the income statement.

Pension Expense

The annual cost recognized by an employer for maintaining a retirement plan for its employees.