Which of the Following Are NOT Ways Risk Management Can

question 11

Multiple Choice

Which of the following are NOT ways risk management can be used to increase the value of a firm?

• A) Risk management can help a firm maintain its optimal capital budget.
• B) Risk management can reduce the expected costs of financial distress.
• C) Risk management can help firms minimize taxes.
• D) Risk management can allow managers to defer receipt of their bonuses and thus postpone tax payments.
• E) Risk management can increase debt capacity.

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Definitions:

Cash Balance

The amount of cash a company has available at any point in time, as reflected in its financial statements.

Timing Differences

Discrepancies between the timing of cash flows and the recognition of revenues and expenses in accounting records.

Recording Error

Mistakes made during the accounting process of recording financial transactions.

Journal

The initial record in which the effects of a transaction are recorded.