Voluntary Disclosure Theory Predicts

question 13

Multiple Choice

Voluntary disclosure theory predicts:

• A)Shareholders will always want increased and more accurate information.
• B)Increased disclosure lowers information asymmetry,thus increasing the cost of capital.
• C)Disclosure will be biased but on average credible.
• D)None of the above.

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Definitions:

Promissory Note Payable

A financial instrument that signifies a written promise by one party to pay a specific sum of money to another party under agreed terms.

360-Day Year

A simplified method of calculating interest for commercial loans or bonds that assumes each month has 30 days, resulting in a 360-day year.

Interest

The cost of borrowing money or the return on investment, typically expressed as a percentage over a period of time.

Principal

The original sum of money borrowed in a loan, or the amount of the investment on which interest is calculated.