Operating and Financial Constraints Placed on a Corporation by Loan

question 80

Multiple Choice

Operating and financial constraints placed on a corporation by loan provision are ________.

• A) agency costs to lenders
• B) agency costs to a firm
• C) necessary to regulate ownership of a firm
• D) necessary to control the risk of a firm

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Definitions:

Capacity-Sustaining Cost

Costs incurred to maintain the production capacity of a company at current levels, including costs for maintenance and repair of equipment.

Batch-Level Cost

Costs that are incurred as a result of producing a batch of products, rather than the production process as a whole.

Unit-Level Cost

A cost that is directly incurred for each unit of production or service provided.

Cost Pools

The accumulation of costs related to an indirect activity.