Which of the Following Refers to the Possibility That a Firm's

question 54

Multiple Choice

Which of the following refers to the possibility that a firm's owners or managers will take actions contrary to the promises contained in the covenants of the securities the firm issues to raise funds?

• A) Liquidity risk.
• B) Price risk.
• C) Credit risk.
• D) Agency costs.

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Definitions:

Cost Method

An accounting method used to value certain investments at their original cost minus any impairment losses.

Comprehensive Income

The total change in equity for a reporting period other than from transactions with owners.

Trading Investments

Trading investments are securities that a company buys and holds primarily for the purpose of selling them in the near term to generate income.

Unrealized Gains

Unrealized gains are increases in the value of an investment or asset that has not been sold, thus not yet turning the gain into cash.