Which of the Following Is a Probable Consequence of the Presence

question 2

Multiple Choice

Which of the following is a probable consequence of the presence of accounting rules that allow firms to hide the financial impact of actions that would harm investors?

• A)Investors may be able to enforce market efficiency.
• B)The WTO will disenfranchise the country that allows this to happen.
• C)Investors will immediately organize a speculative attack and the price of stocks will inflate.
• D)The balance-of-payments deficit will increase leading the economy into a debt trap.
• E)Investors may not be able to adequately judge when the risk of investing in a firm rises.

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Definitions:

Merchandise Inventory

Goods that a company holds for the purpose of resale in the ordinary course of business, often considered as current assets on the balance sheet.

Cost of Goods Sold

Expenses directly arising from the production of goods a company offers for sale, involving labor and materials.

Direct Costs

Costs that can be traced directly to the production of specific goods or services, such as raw materials and labor.

Direct Manufacturing Cost

Expenses directly associated with the production of goods, including labor and materials.