When Assessing Earnings Persistence, It Is Important to Analyze Discretionary

question 15

Multiple Choice

When assessing earnings persistence, it is important to analyze discretionary expenditures. Which of the following is correct?

I. Research and development is generally considered a discretionary expenditure.
II. Decreased discretionary expenditures should always be taken as a positive indicator that the company is getting costs under control.
III. Advertising expenditures can be considered discretionary expenditures, which often have implications for future sales.
IV. Absolute levels of discretionary expenditures are more important than the level of expenditures relative to sales.

• A)I, II, and III
• B)I, III, and IV
• C)II, III, and IV
• D)I and III

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Definitions:

Consistent Message

The practice of ensuring all communications and promotional activities across various channels and mediums deliver a uniform message to reinforce brand recognition and values.

Group Travel

Organized travel planned for a collective of people who move together as a group, experiencing the journey and destinations together.

Encoding

The process of converting information into a particular form that allows for communication or storage.

Decoding

The process by which a receiver interprets and understands a message sent by a sender.