Potential Costs of Providing Segment Information Include

question 66

Multiple Choice

Potential costs of providing segment information include:

• A) management taking extra risks in order to attempt to generate increased returns in its segment.
• B) allowing current or potential investors to identify that the entity is earning high profits in a segment.
• C) disclosing that a segment is making a loss, which may lead to take-over bids by other organisations.
• D) allowing current or potential competitors to identify that the entity is earning high profits in a segment, which may increase competition through new entrants or an attempt to replicate the factors leading to the entity's success.

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Definitions:

Operation of Law

Changes in legal status or rights that occur automatically due to existing legal rules, rather than through the action of any party.

Mutual Agreement

A concord reached by all parties involved, based on shared terms and conditions, often formalized through a contract.

Secured Lending

The practice of issuing loans backed by collateral, providing the lender with security in case of borrower default.

Collateral

An asset offered by a borrower to secure a loan or credit, which can be seized by the lender if the borrower fails to repay according to the terms of the loan.