Which of the Following Earnings Management Techniques Is Frequently Associated

question 4

Multiple Choice

Which of the following earnings management techniques is frequently associated with start-up companies?

• A) Recording immaterial adjustments that cause earnings to meet analysts' expectations.
• B) Recording extremely high warranty expense when earnings are high.
• C) Recognizing revenue when a contract is signed and before goods are delivered or services are provided.
• D) Expensing purchased in-process research and development.

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Definitions:

Future Dividends

Predicted payments made by a corporation to its shareholders out of its earnings in the future.

Stock Split

An action by a company to divide its existing shares into multiple shares to boost the liquidity of the shares, although the firm's overall market capitalization remains unchanged.

Common Stockholders' Equity

The portion of a company's equity that is held by common shareholders, representing ownership interest.

Balance Sheet

A financial statement that displays a company's assets, liabilities, and shareholders' equity at a specific point in time.