Risk Shifting Implies

question 57

Multiple Choice

Risk shifting implies:

• A) When faced with bankruptcy, managers tend to invest in high risk, high return projects
• B) When faced with bankruptcy, managers do not invest more equity capital
• C) When faced with bankruptcy; managers may make accounting changes to conceal the true extent of the problem
• D) All of the above

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Definitions:

Transposition Error

A mistake that occurs when two digits within a number are inadvertently reversed during data entry or recording.

Journal Entry

A record of a financial transaction in the accounting books.

Trial Balance

A bookkeeping worksheet where the balances of all ledgers are compiled into debit and credit account columns to check the accuracy of the financial transactions recorded.

Reference Column

A column in a table or spreadsheet used to hold information or data that aids in categorization or identification.