The Term Moral Hazard Refers To

question 50

Multiple Choice

The term moral hazard refers to:

• A)the chance the firm will default and impose losses on its debt holders.
• B)the under-investment problem.
• C)the over-investment problem.
• D)the idea that individuals will change their behavior if they are not fully exposed to its consequences.

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Definitions:

Journal Entry

is a record in accounting that represents the recording of a financial transaction, comprising debit and credit entries.

Disbursed Accounts

These are accounts from which funds have been paid out or disbursed, typically to settle obligations or expenses.

Petty Cash Fund

A minimal sum of money maintained for the purpose of covering various minor expenditures on the spot.

Journal Entry

A record in accounting that represents a transaction and its impact on various accounts, used to track financial activities.