Financial Information Demonstrates Consistency When

question 64

Multiple Choice

Financial information demonstrates consistency when

• A) firms in the same industry use different accounting methods to account for the same type of transaction.
• B) a company changes its estimate of the salvage value of a fixed asset.
• C) a company fails to adjust its financial statements for changes in the value of the measuring unit.
• D) None of these answer choices are correct.

---

Definitions:

Capital Asset Pricing Model

A model that describes the relationship between systematic risk and expected return for assets, particularly used in the pricing of risky securities.

Expected Return

The weighted average of all possible returns of an investment, considering all risks and the likelihood of each outcome.

Well-diversified Portfolio

An investment portfolio with a mix of assets designed to reduce exposure to risk by spreading investments across various sectors or asset classes.

Price of Money

Often refers to the interest rate, reflecting the cost of borrowing money or the return on savings, generally influenced by inflation, supply and demand for credit, and monetary policy.