Income can be distorted by factors other thaninflation. The most important causes of distortion forinter-industry comparisons are:A. timing of revenue receipts and nonrecurring losses.B. tax write-off policy and different inventory methods.C. A and BD. answer not given

Ratio analysis is the calculation of different ratios from the financial statements.

Answered: Income can be distorted by factors…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Similar questions

Sales of goods are taxed based on? A. Gross Selling price B. Gross Receipt C. Landed Cost D. Answer is not given.
A weakness of the percent-of-sales method to preparing a pro forma income statement is
FIFO and weighted average. But what if a company wants to use LIFO to report its inventory because of the significant tax benefit? How could dollar-value LIFO help them use FIFO for managerial purposes but LIFO for financial statement reporting?
Which of the following is correct about the Limitations of accounting? Select one: O a. Accounting not looks at quality aspect b. there is no bias in accounting c. Price level changes consider in accounting O d. none of the options are correct
Answer both in detail
What is the main criticism of LIFO? A. It presents a balance sheet figure that is out-of-date. B. It artificially creates a higher income. C. It utilizes a unit cost that has no evidence of existence. D. It is often complicated to implement, especially if inventory costs change frequently.
Which of the following statements is not incorrect? I. PAS 2 requires the use of the Allowance Method in accounting for inventory write-down. II. There shall always be an allowance for inventory write-down if the net realizable value of inventories is lower than its cost. III. Regardless of what method the company uses in accounting for inventory write-down, the cost of goods sold must always be the same IV. A company may recognize a gain on reversal of inventory write-down even if the cost of inventory exceeds its net realizable value. a. I and II b. None of these c. II and III d. III and IV e. I and IV
Which limitation of an income statement occurs when one company uses an accelerated depreciation method while another company uses straight-line depreciation? O Companies omit from the income statement items they cannot measure reliably. O Income measurement involves judgment. O Income numbers are affected by the accounting methods employed. All of these answer choices are correct.
The discount rate to be used for calculating the present value of a stream of cash flow should be a)Bank rate b)Prime Lending Rate c)Treasury rate d)Opportunity cost
Which is not a potential problem of utilizing ratio analysis? A. trends and industry averages are historical in nature. B. financial data may be distorted due to price-level changes. C. firms within an industry may not use similar accounting methods. D. all of the above E. answer not given
When making judgements lower profits and asset values are estimated rather than higher values. Which accounting concept does this describe
Which one of the following statements is true? a. Income manipulation is difficult under LIFO.b. Accounting principles do not require that the inventory cost flow approximate the physical flow of goods.c. Companies may use LIFO for tax purposes and FIFO in the financial statements.d. In periods of declining prices, LIFO will result in the payment of less income taxes.

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Income can be distorted by factors other than inflation. The most important causes of distortion for inter-industry comparisons are: A. timing of revenue receipts and nonrecurring losses. B. tax write-off policy and different inventory methods. C. A and B D. answer not given