A Type of Agency Problem That Results in Shareholders Gaining

question 39

Multiple Choice

A type of agency problem that results in shareholders gaining by choosing not to finance new,positive-NPV projects is:

• A)asset substitution.
• B)debt overhang.
• C)excessive risk-taking.
• D)distress costs.

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Definitions:

Chart of Accounts

An organized list of all accounts in a business entity's financial records, each with a unique account number.

Account Names

Specific titles given to accounts that reflect the nature of the transactions they represent in the accounting records.

Account Title

The name given to an account that reflects the type of transaction it represents, such as "Sales Revenue" or "Accounts Payable."

Ledger

A comprehensive set of accounts that records all financial transactions of a business, organized within a book or digital system.