The "Greater Fool" Theory Assumes That

question 57

Multiple Choice

The "greater fool" theory assumes that

• A) markets are efficient.
• B) bubbles cannot exist in well-organized markets.
• C) it makes sense for an investor to buy an asset as long as there is someone else to buy it later for a higher price.
• D) bond market returns are always above stock market returns.

---

Definitions:

Bad Debt Percentage

Bad debt percentage is the proportion of receivables that a company expects not to collect, used in estimating the allowance for doubtful accounts.

Allowance

In accounting, an estimate for future adjustments to accounts receivable, reflecting debts that might not be collectible.

Allowances for Doubtful Accounts

Allowances for doubtful accounts is a contra asset account used to estimate the portion of a company's receivables that may ultimately not be collectible.

Bad Debt Expense

Bad debt expense represents the loss that a company incurs when it is unable to collect receivables from customers who are unable to pay their debts.