Earnings quality refers to the ability of reported earnings (income) to predict future earnings.

a. true
b. false


Ans: a. true

Business

You might also like to view...

The cooperative strategic planning, controlling, and problem solving activities conducted by a company and its vendors and customers to generate efficient and effective transfers of goods and services is referred to as __________________________________________________

Fill in the blank(s) with correct word

Business

Managerial accountants should carefully analyze all except which of the following when considering using either absorption costing statements or variable costing statements?

a. noncontrollable costs b. pricing products c. controllable costs d. which one will make the organization look better on paper

Business

Which of the following is not one of the four Standards of Ethical Conduct for Management Accountants?

A. Credibility B. Confidentiality C. Independence D. Integrity

Business

Assume that your uncle holds just one stock, East Coast Bank (ECB), which he thinks has very little risk. You agree that the stock is relatively safe, but you want to demonstrate that his risk would be even lower if he were more diversified. You obtain the following returns data for West Coast Bank (WCB). Both banks have had less variability than most other stocks over the past 5 years. Measured by the standard deviation of returns, by how much would your uncle's risk have been reduced if he had held a portfolio consisting of 54% in ECB and the remainder in WCB? (Hint: Use the sample standard deviation formula.) Do not round your intermediate calculations.  Year  ECB  WCB   1  40.00%  40.00%   2  -10.00%  15.00%   3  35.00%  -5.00%   4  -5.00%  -10.00%   5  15.00%

 35.00% ? Average return = 15.00%  15.00% Standard deviation = 22.64%  22.64% ? A. 3.59% B. 4.27% C. 2.99% D. 3.99% E. 4.51%

Business