Which One of the Following Statements Is TRUE

question 36

Multiple Choice

Which one of the following statements is TRUE?

• A) An example of asset switching is borrowing money to buy equipment but instead taking it to Las Vegas to gamble with it.
• B) The commission required by the Federal Housing Agency for a small business loan is an example of an agency cost.
• C) An example of an agency cost is the salary of the agent hired to work for the principal.
• D) Creditors have a claim on a firm's earning stream through the dividend payments they receive.
• E) An example of asset switching is an option to exchange one piece of real estate for another.

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Definitions:

Liquidated Damages

refers to a predetermined sum agreed upon by the parties to a contract, to be paid as compensation in case of breach of contract.

Exemption Clause

A contract term that attempts to limit or exclude liability for certain events or damages.

Deposit Forfeiture

A legal or contractual process wherein a deposit made as part of a transaction is lost due to non-compliance with the terms of the agreement.

Exemption Clause

A contractual term that limits or excludes one party's liability for certain breaches, circumstances, or events.