Which of the Following Situations Does NOT Demonstrate an Attempt

question 59

Multiple Choice

Which of the following situations does NOT demonstrate an attempt at financial engineering?

• A) creating complex legal arrangements and financial instruments
• B) structuring debt financing so that it meets the GAAP definition of equity rather than debt
• C) accounting for bona fide business transactions in a transparent manner
• D) aggressively interpreting GAAP so that the impact on critical ratios is minimized

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Definitions:

Dutch Auction

A method for pricing shares (or other assets) where the price is reduced until all offered shares are sold to bidders, effectively finding the market clearing price.

Shares

Units of ownership interest in a corporation or financial asset, providing a proportion of the profits to shareholders.

Firm Commitment Underwriting

A method of underwriting where the underwriter commits to buying all the securities from the issuer and selling them to investors, assuming full financial responsibility for any unsold securities.

Underwriting Spread

The difference between the price at which investment bankers buy an issuance from the issuer and the price at which they sell it to the public.