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Briefly explain if the following examples demonstrate the efficient contract view. ( i ) Accounting numbers are used to design bonus plan contracts rather than
Briefly explain if the following examples demonstrate the efficient contract view.
i Accounting numbers are used to design bonus plan contracts rather than share prices;
ii As part of the debt contracts, the leverage ratio ie debt to total tangible assets excludes
intangible assets from the denominator;
iii A manufacturing company recognises sales revenue at the time of production, even though the
company receives no guaranteed sales contract.
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