Under the Debt Hypothesis for Accounting Policy Choice

question 16

Multiple Choice

Under the debt hypothesis for accounting policy choice:

• A) managers act in their own interests and therefore prefer more remuneration.
• B) managers of entities with bonus plans prefer accounting policies that increase profit in the long-term.
• C) managers have no discretion in choosing accounting policies relating to debt.
• D) managers of entities with high leverage are likely to choose accounting policies that increase profit and equity.