If a Company Operates in More Than One Significant Segment

question 48

Multiple Choice

If a company operates in more than one significant segment they must disclose segmented information in the notes of the financial statements.What is the purpose of the segmented information?

• A)To aid competitors in understanding the business.
• B)To aid the user in assessing the overall risk of the company.
• C)To aid in the preparation of consolidated financial statements.
• D)To aid the user in assessing the liquidity of the company.

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Definitions:

Absorption Costing

An accounting method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed overhead - in the cost of a product.

Chief Executive Officer

The highest-ranking executive in a company, responsible for making major corporate decisions and managing overall operations.

Net Operating Income

A financial metric that calculates a company's profitability by subtracting operating expenses from its total revenue, excluding taxes and interest.

Product Line

A product line is a group of related products marketed under a single brand by a company, aimed at fulfilling related needs of a market segment.