Recent Research Shows That the Amount of a Guarantee Payout

question 30

Multiple Choice

Recent research shows that the amount of a guarantee payout has no effect on consumer cheating. Which of the following is one of the important managerial implications of this?

• A)Guarantees can be restricted to new customers because of the propensity for repeat customers to cheat.
• B)Guarantees can be kept low to prevent rewarding cheaters.
• C)Managers can reap the marketing rewards of higher guarantees without increased payouts due to consumer cheating.
• D)Managers cannot expect to recover the difference in guarantees for different types of consumers.
• E)Guarantee levels can be used to dissuade consumer cheating.

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Definitions:

Financing Activities

Transactions that result in changes to the size and composition of the equity capital or borrowings of the entity, detailed in the cash flow statement.

Current Assets

Assets that are expected to be converted into cash, sold, or consumed within one year or within the business's operating cycle, whichever is longer.

Financing Cash Flow

Cash flow that is related to the financing of a company's operations, including debt, equity, and dividends.

Common Stock

A form of financial security that denotes part ownership in a company and entails a stake in the company's earnings or deficits.