Where Management's Bonuses Are Tied to Profit-Based Performance Measures Management

question 67

Multiple Choice

Where management's bonuses are tied to profit-based performance measures management may have an incentive not to revalue assets because:

• A) When revaluing assets, the value of the asset base increases, consequently the return on assets will fall.
• B) A revaluation may result in a decrease in the value of the asset base.
• C) A revaluation that increases the value of the asset base will increase profit measures.
• D) When revaluing assets, the value of the asset base increases, consequently the debt to equity ratio will fall.

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Definitions:

Prerecorded Voice

Involves automated messages delivered via telephone without the need for a live speaker.

Automatic Telephone Dialing System

Technology that can dial numbers without human intervention, often used in telemarketing.

Truth-in-Lending Act

U.S. federal law designed to promote transparency in consumer credit by requiring lenders to disclose important terms and costs of loans to borrowers.

Secured by Mortgage

Describes a loan or obligation guaranteed with the collateral of real estate property through a legal agreement.