If the Management of an Entity Is Close to Breaching

question 2

Multiple Choice

If the management of an entity is close to breaching a debt covenant that requires maintaining a certain current ratio, management may have an incentive to ________.

• A)either overstate current assets or understate current liabilities
• B)understate either current assets or current liabilities
• C)overstate either current assets or current liabilities
• D)either understate current assets or overstate current liabilities

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Definitions:

Transient Ways

Temporary or short-term methods or paths one might take in various contexts.

Psychoanalysis

A therapeutic approach that aims to explore unconscious motivations and conflicts as a means of treating psychological disorders.

Visible Motivations

Are the clearly observable drives or reasons behind one's actions or behaviors.

Humanistic Psychologists

Psychologists who focus on individual potential and stress the importance of growth and self-actualization.