Which of the following is a probable consequence of the presence of accounting rules that allow firms to hide the financial impact of actions that would harm investors?
A)Investors may be able to enforce market efficiency.
B)The WTO will disenfranchise the country that allows this to happen.
C)Investors will immediately organize a speculative attack and the price of stocks will inflate.
D)The balance-of-payments deficit will increase leading the economy into a debt trap.
E)Investors may not be able to adequately judge when the risk of investing in a firm rises.

Question

Quizplus · Accepted Answer

When accounting rules allow firms to hide the financial impact of actions that would harm investors, it becomes harder for investors to judge the true risk of investing in a firm. This can lead to misjudgments about the value of investments, which can result in financial losses.

Which of the Following Is a Probable Consequence of the Presence