1.

Which one of the following terms would be likely to be included in a debt contract?

Group of answer choices

maximum levearge of 60%

hurdle or threshold minimum return on investment of 10%

minimum leverage of 60%

hurdle or threshold maximum return on investment of 10%

2.

Which one of the following statements about agency theory is TRUE?

Group of answer choices

The nexus of contracts view of the firm underpins the entity principle in accounting.

Monitoring costs are incurred by principals.

Residual loss occurs because the cost of equity exceeds the cost of debt.

Agency theory views the shareholder as an agent for the manager.

3.

Which one of the following is the most visible form of earnings management?

Group of answer choices

Accrual accounting techniques

Selection of accounting policies

Conservatism

Income smoothing