Answered: An effective capital allocation process…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

An effective capital allocation process

a) promotes productivity.

b) encourages innovation.

c) provides an efficient market for buying and selling securities.

d) all of these answers are correct.

Which of the following are elements of a single, widely accepted set of high-quality accounting standards?

a) Common laws and common application of accounting standards.

b) Common education of market participants and common currency.

c) Common boards of directors and common enforcement.

d) Common delivery systems and common high-quality auditing standards.

The objective of financial reporting

a) is focused on stewardship.

b) is focused on management decisions.

c) is focused on equity investors, lenders, and other creditors in making decisions.

d) is communicated in the president's letter.

A company is viewed as separate and distinct from its owners when a(n) ________ perspective is adopted.

a) entity

b) proprietary

c) governance

d) stewardship

A company using IFRS to prepare its financial statements will use a hierarchy to determine what recognition, valuation, and disclosure requirements should be used.
1. IFRS, IAS, IFRS Interpretations
2. Pronouncements of other standard-setting bodies
3. The Conceptual Framework for Financial Reporting
Which of the following depicts the correct order of the hierarchy?

a) 2, 3, 1.

b) 3, 2, 1.

c) 1, 3, 2.

d) 1, 2, 3.

The International Organization of Securities Commissions (IOSCO)

a) is an association of organizations that regulate the world’s securities markets.

b) does not set accounting standards.

c) supports the development and use of IFRS.

d) all of these answer choices are correct.

Which of the following is not a major challenge facing the accounting profession?

a) Timeliness.

b) Accounting for hard assets.

c) Forward-looking information.

d) Nonfinancial measurements.

The international financial reporting environment includes challenges in financial reporting including all of the following except:

a) Decision-usefulness.

b) Political environment.

c) Expectations gap.

d) Ethics.

Significant financial reporting issues facing global financial reporting and efficient capital allocation include all of the following except:

a) How to provide real-time financial statement information.

b) How to report nonfinancial measures such as customer satisfaction.

c) How to provide backward-looking information.

d) How to provide forward-looking information.

From the four statements that follow, which are true?
1. Technical competence is not enough when encountering ethical decisions.
2. The pressures "to bend the rules," "to play the game," "to just ignore it" can be considerable.
3. Time, job, client, personal, and peer pressures do not complicate the process of ethical sensitivity and selection among alternatives.
4. The decision may be easier because there is no comprehensive ethical system to provide guidelines.

a) 1, 2, and 4 are all true.

b) 2 and 4 are all true.

c) 1 and 2 are all true.

d) 1, 2, 3, and 4 are all true.

Definition Definition Degree to which financial markets incorporate all available information into the prices of assets. In a more efficient market, the prices reflect the available information more than that in a weak efficient market. It is difficult for investors to outperform the market in a strong efficient market. This is because all the available information is already discounted in the asset's price. However, in a weak-form efficiency, the market does not reflect all information in the asset's price. As a result, it becomes easier to generate better returns in a weak form or an inefficient market.

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