Which of the following findings would support the naive-investor hypothesis?
a. A finding that security prices respond to income levels that differ solely because of alternative accounting methods with no cash flow consequences.
b. A finding that security prices do not respond to artificial book-income differences.
c. A finding that security prices do not respond to the adoption of LIFO for accounting for inventories and cost of goods sold.
d. A finding that security prices do not respond to a change in reported accounting earnings from the prior year.
ANSWER: A
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Use the five transactions for Hennigan Company described below to answer the question(s) that follow(s). Dec 1 Hennigan purchases two new saws on credit at $375 each. The saws are added to Hennigan's rental inventory. Payment is due in 30 days. 8 Hennigan accepts advance deposits for tool Company of $75. 15 Hennigan receives a bill from Farmer's Electric Company for $150 . Payment is due in 30
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What will be an ideal response?
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