Answer:
<u>Information asymmetry.</u>
Explanation:
Information asymmetry is characterized as a market failure that causes power imbalance. This occurs when some party involved has more information than another party.
This situation is becoming more widespread in microeconomics, as it interferes with the classic concept that the free market must follow the concept of perfect competition.
But information asymmetry is a market failure that directly impacts business relationships, and causes cases of adverse selection and moral hazard.
Ideally, there should be greater transparency in the financial statements that are required to be published so that the risk of information asymmetry between the company and investors is reduced.
Answer:
Gross profit $39,000
Explanation:
X company
Income statement ( parochial)
For the year ended, June 30 20YY
Sales revenue $104,000
Less: cost of goods sold $65,000
Gross profit $39,000
In that case, we do not use Income tax expense, Operating expenses, Deferred revenues, Non-operating revenues because those will be needed when we will calculate the net income.
D. Eliminates other options is correct. Just took the test.
Answer:
(a) INDICATOR OF FRAUD
Explanation:
The reason is that the supervisor has an outside business setup related to the department's setup which gives rise to a conflict of interest.
Answer:
(a) increase its dividend;
dividends are increased for two reasons:
- the company has excess cash and it doesn't have any possible investments on hand
- the board and upper management want to increase the stock price and higher dividends always result in higher stock prices, even if it is only in the short run.
(b) buy back some of its common stock shares;
- the company has excess cash and the board and upper management believe that the stock price is too low.
(c) pay down some of its debt;
- the company has excess cash and it considers that the cost of its debt is too high and it can get cheaper financing from other sources if needed.
(d) increase its use of internal financing;
- the board and upper management considers that the company needs to invest in new or existing projects and they consider that the financing costs are too high. Also, on the long run if things work well, the stock price should increase.
(e) take the public firm private
- the company has excess cash and the board and upper management believe that the stock price is too low. It is similar to (b) only on an extreme situation.
