ACCT 370 Read & Interact Revsine, Collins, Johnson, Mittelstaedt, & Soffer Chapter 8 solution answer

ACCT 370 Read & Interact Revsine, Collins, Johnson, Mittelstaedt, & Soffer Chapter 8 solutions complete answers

 

In a principal-agent relationship, a cost that may arise because of the relationship is called a(n)       cost.

 

Restrictions that help guard against conflicts of interest between creditors and borrowers are referred to as            .

 

Actions that a borrower must take are            .

 

Assume that XYZ Company has a loan agreement that states that it must maintain a fixed-charge coverage ratio greater than or equal to 1.0 They have net income of $75, noncash charges of $25, current loan maturities of $60, stock repurchases of $10, and replacement capital expenditures of $20. Which of the following statements is true?

 

True or false: The fixed-charge coverage ratio requirement improves the company's ability to pay dividends.

 

In a principal-agent relationship, the       is able to make decisions on behalf of, or that impact, the      .

 

Covenants that restrict the borrower's actions are called       covenants.

 

Limits on new borrowing and ensuring that cash from ongoing operations will not be diverted away from servicing debt are known as

 

Restrictions on total indebtedness

 

Which of the following is not an example of an affirmative covenant?

 

The section of a loan agreement describing circumstances where the creditor obtains additional rights is called the       of       section.

 

The calculation for the fixed-charge coverage ratio uses ______ in its denominator.

 

Failure to pay other debts when due is known as

 

The fixed-charge coverage ratio requirements limits a company's ability to

 

The dollar amount by which net worth could decline before triggering a covenant violation is called the net worth            .

 

Negative covenants may include

 

Many loan agreements have financial covenants that rely on ______

 

Which of the following types of covenants help assure the creditor that cash will be available to make interest and principal payments when due?

 

A study that looked at voluntary accounting changes made by companies reporting covenant violations found that the most common violations are

 

In the event of default, actions available to creditors include

 

A study that examined discretionary accounting accruals found that firms approaching covenant violations were found to use the accruals to

 

When the borrower is unable to make the scheduled interest and principal payments, this is known as a

 

Covenant-lite loans

 

The net worth safety margin can be calculated as the difference between a firm's

 

Potential conflicts of interest can be lessened if managers are given incentives to behave as if they were

 

Which of the following refers to the accounting rules in place when a loan is first granted?

 

Incentives that reward executives for three to seven years of growth and prosperity are called

 

For companies approaching default, which of the following are among the most common techniques used at these companies to increase earnings?

 

The basic structures to annual incentive plans include the

 

Discretionary accounting accruals are

 

Loans that contain minimal covenants are called

 

An award of stock that is nontransferable or subject to forfeiture for a period of years is known as

 

Ways to align managers' incentives with owners' interests are to link

 

Performance-based pay plans are important from a financial reporting perspective because

 

Yearly financial performance goals that must be achieved if the executive is to earn various bonus awards are called

 

Information about a company's executive compensation practices can be found in a company's

 

Which of the following are features of annual incentive plans?

 

Items included in the compensation discussion and analysis would not include

 

Incentives that give the holder the right but not the obligation to buy company shares as a stated price are called

 

True or false: A compensation committee may need to use its discretion to adjust bonus payouts if they believe that actions taken by managers are artificial or not in the company's best interests.

 

Incentives that require a manager to achieve certain multi-year financial achievement goals are called

 

Bonuses earned due to accounting fraud or other dishonest actions may be required to be paid back. This is called a       provision. (Enter one word per blank.)

 

The proxy statement

 

A compensation discussion and analysis (CD&A) 

 

Which of the following statements is not true regarding regulatory accounting principles (RAP)?

 

Which of the following is not a reason that accounting-based incentives is controversial?

 

Requirements that ensure an institution remains financially sound and can meet its obligations to depositors are called             requirements.

 

True or false: The SEC made clawbacks mandatory whenever a financial reporting error that affected compensation is later uncovered.

 

The capital adequacy ratio is calculated as

 

Loan loss provisions for banks

 

In the utilities industry, rate formulas are set to determine rates that customers are charged. This is based on allowed revenues which cover

 

In addition to financial statements prepared under GAAP, banks, insurance companies, and public utilities may also be required to prepare statements under

 

Which of the following statements is true regarding expenses allowed for public utilities?

 

_______ require banks and other financial institutions to meet minimum capital requirements.

 

The tax benefits of LIFO can only be obtained when LIFO is used in GAAP financial statements. This is known as the                  .

 

Does the amount of investor capital exceed the minimum level required? The answer to this question is called the

 

The collapse of a global housing bubble in 2008 triggered

 

A bank's estimated bad debt expense associated with its loan receivables is called its

 

In the utility industry, the rate formula sets total allow revenue equal to an amount that covers the company's operating costs and provides

 

In accounting for utility companies under GAAP,

 

Sizable losses for financial institutions that had invested heavily in mortgage-backed securities (MBSs) and collateralized debt obligations (CDOs) resulted in which of the following?

 

Which of the following statements is true regarding tax regulations and GAAP?

 

______ is the practice of continually revaluing assets and liabilities to the price they would sell or settle for regardless of the historical value of the asset or liability.

 

Loan charge-offs for banks

 

In 2008, financial services firms in the U.S. reported mortgage-related fair value accounting losses and loan write-downs totaling roughly

 

Covenants that prevent risks related to mergers and acquisitions that could affect loan repayments are called

 

Affirmative covenants are actions that the borrower must make and generally include

 

When the borrower violates one or more loan covenants but has made all interest and principal payments, this is known as a