In a Restructuring It Is Possible That Managers May Use

question 37

Multiple Choice

In a restructuring it is possible that managers may use the opportunity to write down assets that do not even relate directly to the restructuring action.Why might a manager decide to write down an asset that is not included in the restructuring action?

• A) The manager is practicing conservatism.
• B) The write down relieves future periods of depreciation expense, which increases cash flows.
• C) Normally the stock market reacts positively to restructuring and the greater the amount the better.
• D) The write down relieves future periods of depreciation expense, which increases earnings.

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Definitions:

Retained Earnings

Profits that a company has kept or retained rather than distributing to shareholders as dividends.

Common Stock Dividends Distributable

An amount that has been declared by a corporation to be distributed to its common stockholders as dividends but has not yet been paid.

Paid-in Capital

The amount of money raised by a company through the issuance of securities to investors, reflecting the capital provided by shareholders in exchange for stock.

Market Value

The current price at which an asset or service can be bought or sold in the marketplace.