Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN: 9781285190907
Author: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher: Cengage Learning
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Chapter 6, Problem 2QE
90907-6-2QE
To determine
Explain the way the
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Why would managers be willing to make decisions based on estimated revenues and expenses instead of only on actual financial data?
A financial manager’s goal of maximizing current or short-term earnings may not be appropriate because
a. earnings are subjective; they can be defined in various ways such as accounting or economic earnings
b. increased earnings may be accompanied by unacceptably higher levels of risk
c. All of the choices
d. it fails to consider the timing of the benefits
The following statements are true regarding the financial perspective EXCEPT:a. Financial performance can be improved through two basic approaches – revenuegrowth and productivity.b. Financial objectives typically relate to productivity.c. A financial measure might be net income.d. A financial objective might be to offer low process to satisfy and retain price-sensitivecustomers.
Chapter 6 Solutions
Financial Reporting, Financial Statement Analysis and Valuation
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- Is there a way to prevent managers from focusing on accounting measures as performance measures?arrow_forwardWhich of the following statements regarding the balanced scorecard is not correct? a. It seeks to address the problems associated with traditional financial measures used to assess performance. b. The notion of value chain analysis plays a major role in the drawing up of a balanced scorecard. c. It relies on the perception of the users with regard to service provided. d. It is directly derived from scientific management theories.arrow_forwardWhat type of qualitative issues should management consider if a quantitative analysis reveals that a segment should be dropped?arrow_forward
- If there are deviations from the stated goals and objectives, what steps can managers take to get back on track? Provide at least two specific examples.arrow_forwardThe chapter encourages analysts to develop forecasts that are realistic, objective, and unbiased. Some firms managers tend to be optimistic. Some accounting principles tend to be conservative. Describe the different risks and incentives that managers, accountants, and analysts face. Explain how these different risks and incentives lead managers, accountants, and analysts to different biases when predicting uncertain outcomes.arrow_forwardExplain the problems of adverse selection and moral hazard caused by asymmetricinformation. How can financial intermediaries alleviate those problems?arrow_forward
- Evaluate earnings management from a utilitarian perspective. Can earnings management be an ethical practice? Discuss why or why not.arrow_forwardWhich of the following is not a managerial planning or control report? Effectiveness of advertising and promotionAnalysis of bad debt and credit policies Sales analysis and profitability analysisInventory availabilityarrow_forwardWhich of the following statements about the balanced scorecard approach is false? It requires managers to focus on financial measures more than nonfinancial measures. It looks at performance from the following perspectives: financial, customer, internal business, and learning and growth. It helps balance short-term operating performance with long-term strategies. It recognizes that traditional measures of performance are often not adequate to fully assess a company’s performance.arrow_forward
- Which of the following statements regarding responsibility accounting systems is true? O Residual income is best used when evaluating the performance of profit centers rather than investment centers. An advantage of using return on investment to evaluate performance is that it encourages managers to increase both operating assets and operating income. O The use of residual income as a performance measure may lead segment managers to reject investments in projects that would be favorable for the company as a whole. O Residual income is a less effective metric for evaluating performance if there are significant differences in the size of the operating segments. O None of the above statements is true.arrow_forwardWhich 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 correctarrow_forwardFinancial ratio analysis is a widely used tool for assessing the "health" of an organization and identifying any specific areas of weakness within the operation that may require management attention. Show us the formula for the ratio and explain in plain terms what the ratio tells us about the company's performance or operational efficiency. Also be sure to indicate whether it's better for the ratio's calculated result to be a higher or lower value.arrow_forward
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