When Assets Are Overstated (Intentional or Unintentional)

question 52

Multiple Choice

When assets are overstated (intentional or unintentional)

• A)management has a better chance to earn their end of year bonuses
• B)outsiders are mislead about the future cash flows when the assets are sold
• C)outsiders are mislead about the current cash flows
• D)management is misleading outsiders about the future cash flows that the assets can earn

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Definitions:

Yield To Maturity

The total return anticipated on a bond if held until it matures, including all payments of principal and interest, measured as an annual rate.

Noncallable Bonds

Bonds that cannot be redeemed by the issuer before their maturity date, providing investors with certainty that they will receive interest payments for the life of the bond.

Par Value

The stated value of a bond, stock share, or coupon as declared by the issuer.

Annual Coupon

The interest payment distributed each year to holders of bonds, generally represented as a percentage of the bond's principal amount.