Florida Company (FC)and Minnesota Company (MC)are Both Service Companies

question 45

Multiple Choice

Florida Company (FC) and Minnesota Company (MC) are both service companies. Their stock returns for the past three years were as follows: FC: −5 percent, 15 percent, 20 percent; MC: 8 percent, 8 percent, 20 percent.
Calculate the standard deviations of returns for FC and MC. (Ignore the correction for the loss of a degree of freedom set out in the text.)

• A)FC: 10.8 percent; MC: 5.7 percent
• B)FC: 18.7 percent; MC: 9.8 percent
• C)FC: 13.2 percent; MC: 6.9 percent
• D)FC: 6.9 percent; MC: 13.2 percent

---

Definitions:

GAAP

Generally Accepted Accounting Principles; the common set of accounting standards and procedures used in the U.S. to compile financial statements.

Revenue Recognition

A principle within accounting that determines the specific conditions under which revenue is recognized or accounted for.

Overtime Wages

Additional pay granted to employees for hours worked beyond their standard scheduled hours.

Expensed

Recorded as an expense in the financial statements in the period in which it is incurred.