Advantages of the Method of Least Squares Over the High-Low

question 38

Multiple Choice

Advantages of the method of least squares over the high-low method include all the following EXCEPT

• A)a statistical method is used to mathematically derive the cost function.
• B)only two points are used to develop the cost function.
• C)the squared differences between actual observations and the line (cost function) are minimized.
• D)all the observations have an effect on the cost function.

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Definitions:

Equity

The value of an owner's interest in a property or business, determined by subtracting liabilities from assets.

Trading Securities

Marketable securities held by a firm with the intent of short-term trading for profit, which are classified as current assets on the balance sheet.

Accounting Principles

The foundational concepts and guidelines that govern the field of accounting, such as revenue recognition, matching principle, and full disclosure.

Extraordinary Item

Events or transactions that are both unusual in nature and infrequent in occurrence, impacting a company's financial position.