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Use This Fact Situation to Answer the Related Questions That

question 10

Multiple Choice

Use this fact situation to answer the related questions that follow. A,B,and C are directors of Multi Corp Ltd. ,a private provincial corporation that is presently negotiating the purchase of another company,Gladstone Inc. ,whose business should compliment the business of Multi Corp Ltd.Based on a report arising from a review of the books,records,and financial statement of Gladstone Inc.by Multi Corp's accountants,A,B,and C have every reason to believe that the acquisition of Gladstone Inc.will benefit Multi Corp Ltd.and increase its yearly profits substantially.As a result,A,B,and C vote to go ahead with the purchase by Multi Corp Ltd.of Gladstone Inc.However,after the purchase,it is found that the books and records of Gladstone Inc.had been fraudulently manipulated and that it was really in poor financial health.When this information is discovered,the value of Multi Corp Ltd.'s shares falls dramatically and Multi Corp Ltd.is forced into bankruptcy.Needless to say,the shareholders of Multi Corp Ltd.blame A,B,and C for their losses and commence an action against them for damages equal to the lost value of their shares.
In this case,the shareholders will likely argue that A,B,and C

Definitions:

Savings Deposit

A bank deposit that typically earns interest and is intended for holding money that is not expected to be spent immediately.

M1 is a category of the money supply that includes all physical money such as coins and currency, as well as demand deposits and other liquid assets held by the central bank.

Reserve Ratio

The portion of depositors' balances that banks must have on hand as cash.

Outstanding Loans

The total amount of borrowed funds that are still owed by the borrower to the lender, including both principal and interest.