Bryan Invested in Bryco NV Shares When the fiRm Was

question 11

Multiple Choice

Bryan invested in Bryco NV shares when the firm was financed solely with equity.The firm is now utilizing debt in its capital structure.To unlever his position, Bryan needs to:

• A)borrow some money and purchase additional shares of Bryco.
• B)maintain his current position as the debt of the firm did not affect his personal leverage position.
• C)sell some shares of Bryco and hold the proceeds in cash.
• D)sell some shares of Bryco and loan it out such that he creates a personal debt-equity ratio equal to that of
• The firm.
• E)create a personal debt-equity ratio that is equal to exactly 50% of the debt-equity ratio of the firm.

Identify and classify different types of financial instruments and transactions.

Grasp the principles behind the initial recognition and measurement of financial instruments.

Learn the impact of financial instruments on financial statements, including presentation and disclosure requirements.

Understand the accounting treatment for convertible notes and the transition between equity and liability classifications.

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Definitions:

Human Fraud

Intentional trickery by members of an organization aimed at obtaining an unethical or illegal advantage.

Cost-Benefit Principle

An economic principle that compares the cost of an action to its benefits. The action is considered favorable if the benefits outweigh the costs.

Collusion

An agreement, usually secretive, between two or more parties to limit open competition by deceiving or defrauding others of their legal rights, or to obtain an objective forbidden by law, typically involving fraud or gaining an unfair market advantage.

Establishing Responsibilities

A principle of internal control that aims to clearly define roles and duties within an organization to ensure accountability and efficient operations.