Which Situation Below Might Indicate a Company Has a Low

question 99

Multiple Choice

Which situation below might indicate a company has a low quality of earnings?

• A) Revenue is recorded when recognized
• B) Repair costs are capitalized and then depreciated.
• C) The financial statements are prepared in accordance with generally accepted accounting principles.
• D) The same accounting principles are used each year.

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Definitions:

Security Interest

A legal claim or lien on collateral, ensuring that a debt or obligation is secured with specific property.

Creditor

An individual or institution that lends money or extends credit to another entity, which is obliged to pay back the loan.

Pledge

The transfer of collateral to a secured party.

Collateral

Assets pledged by a borrower to secure a loan or credit, which the lender can seize if the borrower defaults on the repayment.