True or False? Correct A governmental unit is an organization that loses money An encumbrance is...

True or False? Correct

A governmental unit is an organization that loses money
An encumbrance is an expenditure for a capital asset
Municipality is not a governmental unit
The primary goal of derivative instruments is to bypass the laws.

Solutions

Expert Solution

a. Governmental unit is an organization that loses money:

The statement is false. A governmental unit is a state or any political subdivision or any department of the government or political subdivision. It is not something which loses money.

b. An encumbrance is an expenditure for capital asset:

The assets purchased by the company are sometimes mortgaged or pledged to loan providers. That is called encumbrance. Encumbrance is a situation where assets are mortgaged or pledged as a security for funds borrowed. It is not an expenditure associated with capital asset. If the assets are not pledged, there is no encumbrance. Hence, the statement is false.

c. Municipality is not a governmental unit:

The statement is false. A governmental unit is a state or any political subdivision or any department of the government or political subdivision. Municipality is a political subdivision created for governance purposes. Hence, it is a governmental unit.

d. The primary goal of derivative instruments is to bypass the laws:

The statement is false. Derivative instruments are financial instruments, the value of which depends on the value of an underlying security. The trading of derivatives is legal. Though the regulations for trading of derivatives are yet to be implemented explicitly, derivatives are similar to contracts between two people, which are enforceable in a court of law. Hence, derivatives cannot be terms as instruments created to bypass the law.

ekkarill92 answered 1 year ago

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