To Minimize the Problem of Moral Hazard When Making a Loan

question 14

Multiple Choice

To minimize the problem of moral hazard when making a loan, a bank requires borrowers to:

• A)sign a covenant.
• B)use their car as collateral.
• C)make the bank the majority owner of the firm.
• D)allow themselves to be monitored by the FDIC.

Understand and apply inventory calculation methods including LIFO, FIFO, and average cost method.

Determine the value of the ending inventory using various inventory valuation methods.

Calculate the total sum of units or cost based on given transaction records.

Compute the extension column value by multiplying the unit cost by quantity.

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Definitions:

EBIT

Earnings Before Interest and Taxes, also known as EBIT, is a way to evaluate a company's profit without considering tax and interest expenses.

Financial Risk

The likelihood of experiencing a loss of money in a business operation or investment.

EBIT

A financial metric, Earnings Before Interest and Taxes, calculates a business's income by including all earnings and expenditures with the exception of those from interest and taxes.

Operating Leverage

A measure of how revenue growth translates into growth in operating income, indicating the percentage of fixed to variable costs a company has.