Which of the Following Reforms Would Reduce the Likelihood of a Future

question 378

Multiple Choice

Which of the following reforms would reduce the likelihood of a future financial crisis?

• A) increased regulations that would make it more difficult for lenders to foreclose on borrowers who are delinquent on mortgage payments
• B) expansion of government-sponsored lending in order to make loanable funds more readily available to sub-prime borrowers
• C) institutional changes that would strengthen the property rights of shareholders and provide financial managers with a stronger incentive to pursue long-run objectives
• D) frequent regulatory changes in order to search for and find the combination that would be most effective

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Definitions:

Inventory Period

The average time that goods remain in inventory before being sold, a measure of inventory management efficiency.

Commercial Paper

An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories, and meeting short-term liabilities.

Field Warehouse Loan

A form of short-term financing where a lender provides a loan with inventory as collateral, which is stored on the borrower's premises but controlled by an independent third party.

Marketable Securities

Financial instruments that can be quickly converted into cash at market value, including stocks and bonds.