Managers May Be Motivated to Revalue Assets Where There Are

question 53

Multiple Choice

Managers may be motivated to revalue assets where there are common forms of debt covenants in place because.

• A) It loosens the covenant and allows the business to borrow more.
• B) Revaluing assets provides more relevant information for debt-holders to use when making decisions.
• C) Revaluing assets provides greater cash flows out of which to repay debt.
• D) Revaluing assets provides more relevant information for debt-holders to use when making decisions and provides greater cash flows out of which to repay debt.
• E) None of the given Answers.

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Definitions:

Cost of Goods Sold

Direct costs attributable to the production of goods sold by a company, including materials and labor costs.

Inventory Purchases

Transactions involving buying products or raw materials for the purpose of resale or production.

Merchandise

Goods that are purchased, stored, and then sold by retailers or wholesalers, typically in the context of inventory for sale.

Cash Disbursements

Payments made by a business in cash, including expenses, debt payments, and distributions to shareholders.