Which of the Following Statements Is True with Regards to the Political

question 9

Multiple Choice

Which of the following statements is true with regards to the political cost hypothesis?

• A) Political costs arise as a result of an entity's relationships with shareholders and lenders.
• B) Managers of financial institutions may prefer to increase profits to reduce government pressure to pass on interest rate cuts.
• C) Smaller entities are more likely to be the target of environmental groups.
• D) Managers of entities that are more politically visible are expected to choose accounting policies that reduce profit in order to avoid political costs.

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Definitions:

Trade Discounts

A reduction in price given by a supplier or manufacturer to a buyer based on the quantity of product purchased or the immediate payment of goods.

Future Marketing

Strategies and efforts made to plan and execute marketing activities targeting future trends and consumer needs.

Cash Discount

A reduction in invoice amount by a seller as an incentive for early payment by the buyer.

Net 30

A payment term that indicates the full payment is due 30 days from the invoice date.