Positive covenants specify actions a borrowing company must take as part of the indenture. These covenants eliminate the possibility that managers of financially distressed firms will pass on positive NPV projects. Question options: a) True b) False
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Positive covenants specify actions a borrowing company must take as part of the indenture. These covenants eliminate the possibility that managers of financially distressed firms will pass on positive NPV projects.
Question options:
| a) True | |
| b) False |
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- What tools are available for solving adverse selection and moral hazard problems in debt contracts and in equity contracts?The realized gain (loss) on sale of debt investments with an objective of collecting contractual cash flows and to sell when circumstances warrants is the difference of the net selling price and the fair value of the bonds. Group of answer choices False TrueBonds can be an effective counterbalance in a portfolio heavily invested in stocks. True False
- Which of the following is correct regarding the classification of investment in debt instruments as financial asset at fair value through OCI? Group of answer choices A. An entity may make an irrevocable election to classify investment in a debt instrument that is not ‘held for trading’ as such. B. All of these. C. This classification is not allowed for investment in debt instruments. D. In order to be classified as such, a debt instrument needs to both have simple principal and interest cash flows and be held in a business model in which both holding and selling financial assets are integral to meeting management’s objectives.The use of fair value to account for debt investments allows for more relevance of accounting figures because they would reflect the latest market assessment and opinion regarding these instruments. a. Do you agree with this statement? Explain why. b. What are the possible disadvantages’ of using the fair value accounting?In a troubled-debt situation, why might the creditor grant concessions to the debtor?
- Identify and define the nonbankruptcy compromises between debtors and creditors.Which of the following case would allow the capitalization of Interest Expense No Case allows this transaction Borrowing Cost Provided the interest is immaterial Only if Management AllowsWhich of the following is correct regarding the classification of investment in debt instruments as financial asset at fair value through OCI? a. This classification is not allowed for investment in debt instruments. b. An entity may make an irrevocable election to classify investment in a debt instrument that is not ‘held for trading’ as such. c. In order to be classified as such, a debt instrument needs to both have simple principal and interest cash flows and be held in a business model in which both holding and selling financial assets are integral to meeting management’s objectives. d. All of the above.
- (i). Debt investments not plan to sell reported at a. amortized cost. b. fair value. c. the lower of amortized cost of fair value. d. net realizable value. (ii). which of the following caa be reported at fair value? a. Debt investments. b. Equity investments. c. Both debt and equity investments: d None of these answers' choices are correct.1. If an investor has unique needs and does not care about liquidity, which contract is right for them: future or forward?Which of the following is an arrangement by which one party promises to pay a sum of money to policyholder as protection against an adverse or unfavorable occurrence of event? a. Short Term Loans b. Fixed Deposit c. Insurance d. Investment