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Question
Covenants that place direct restrictions on managerial decisions are called
A. affirmative restrictions.
B. affirmative covenants.
C. negative restrictions.
D. negative covenants.
Answer
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Related questions
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Required: a. What amount should Kay report as gross accounts receivable at December 31, 2012?
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A factor that can reduce managers' short-term focus is the fact that incentive compensation plans are administered by a compensation committee that can intervene when circumstances warrant modification of the scheduled incentive award.
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The wide use of accounting-based incentives is controversial because earnings growth does not automatically translate into increased shareholder value.
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Firms now must provide a compensation discussion and analysis in the proxy statement which describes the specific items of corporate performance that are taken into account when making compensation decisions.
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Stock options come in various forms, the choice of which is largely dependent on the financial accounting treatment for the executive and the company.
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Managerial strategies and decisions clearly affect stock prices both in the short and long run.
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Borrowers do not appear willing to pay substantially higher interest rates to retain accounting flexibility that may help them avoid covenant violations.
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Because covenant compliance can be jeopardized by mandated changes in accounting principles, many loan agreements have financial covenants that rely on the accounting rules in place when the loan is first granted.
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Financial covenants establish minimum financial tests with which a borrower must comply.
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Commercial lending agreements may contain provisions that are designed to protect the lender from a deterioration of the borrower's creditworthiness.
Q:
Risky firms have a higher risk-adjusted cost of capital. Which one of the following factors would contribute to that firm also having a high price/earnings ratio?
A. High earnings per share.
B. Low earnings per share.
C. Growth opportunities.
D. High risk and high P/E ratio cannot occur simultaneously.
Q:
Rate regulation provides incentives for public utility managers to
A. artificially decrease the asset base.
B. artificially increase the asset base.
C. artificially decrease operating expenses.
D. artificially decrease taxes.
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In the utilities industry, rate formulas are established to allow the utilities to set total allowed revenues to recover
A. only the administrative costs of operations.
B. only the operating costs associated with operations.
C. all operating costs, depreciation, taxes, and a fair return on invested capital.
D. all operating costs other than depreciation and taxes, and a fair return on invested capital.
Q:
Compensation incentives that motivate and reward executives for five years of growth and prosperity are called
A. base salaries.
B. short-term incentives.
C. long-term incentives.
D. executive compensation packages.
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Debt covenants benefit
A. lenders.
B. borrowers.
C. both lenders and borrowers.
D. neither borrowers nor lenders, but are required by the SEC as a condition of issuing debt securities.
Q:
Potential conflicts of interest permeate
A. few business relationships.
B. only relationships between investors and managers.
C. only relationships between borrowers and lenders.
D. many business relationships.
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A. the consignor.
B. the consignee.
C. both the consignor and the consignee.
D. neither the consignor nor the consignee.
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A. large number of expensive inventory units exist.
B. small number of expensive inventory units exist.
C. large number of inexpensive inventory units exist.
D. small number of inexpensive inventory units exist.