All Things Being Equal,firms Would Typically Prefer to Disclose Low

question 48

Multiple Choice

All things being equal,firms would typically prefer to disclose low levels of debt because:

• A) Any debt is a bad thing in the capital structure of a business.
• B) Additional debt may lead to a technical breach of a firm's contractual agreements with existing debt-holders and lead to the possible wind-up of the business or the need to renegotiate the contract.
• C) The level of recognised debt will affect the profitability of the business.
• D) Recognising debt in the income statement may lead to a decrease in management bonuses that are based on the times-interest-earned and debt-to-assets ratios.
• E) None of the given answers.

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Definitions:

Auto Magazine

A publication that focuses on automotive industry news, car reviews, and features about new and upcoming vehicles.

Car Industry

the global business sector involved in the manufacturing, design, development, marketing, and selling of motor vehicles, including cars, trucks, motorcycles, and related services.

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The process of mailing advertisements to a large number of people over an extended geographic area.