You Are a Potential Creditor and Are Concerned That a Particular

question 167

Multiple Choice

You are a potential creditor and are concerned that a particular company you are ready to give a loan to might have too much debt. Which financial statement would provide you information needed in order to evaluate your concern?

• A)Balance Sheet
• B)Income Statement
• C)Statement of Retained Earnings
• D)Statement of Public Accounting

---

Definitions:

Liability Rules

Laws that require A to compensate B for damages that A imposed on B.

Coase Theorem

A principle that asserts that if property rights are clearly defined and transaction costs are low, parties will negotiate to correct externalities without government intervention.

Negotiations

The process by which parties with differing interests arrive at a mutual agreement or compromise through discussion and bargaining.

Liability Rule

A legal framework in which an infringer must compensate the owner for unauthorized use of property, typically applied in cases of copyright or patent infringements.