When Making a Voluntary Accounting Change, a Firm Must Explain

question 36

True/False

When making a voluntary accounting change, a firm must explain the justification for the change on the basis that it more accurately portrays its financial position and performance.

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Definitions:

Debt

Money owed by one party, the borrower, to a second party, the lender; it is often represented by loans or bonds.

Capital Structure

The mix of a company's long-term debt, specific short-term debt, common equity, and preferred equity which funds its overall operations and growth.

EPS

Earnings per share, a key indicator of a company's profitability, calculated as the company's net profit divided by the number of its outstanding shares.

DFL

Degree of Financial Leverage; a measure that shows how much a company's earnings per share (EPS) are affected by changes in its operating income, indicating the volatility of earnings.