To Assess the Quality of Earnings, Financial Statement Users Should

question 80

Multiple Choice

To assess the quality of earnings, financial statement users should look at

• A) the income statement only.
• B) the statement of cash flows.
• C) the level of business risk.
• D) the whole set of financial statements, including the notes, as well as environmental factors.

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Definitions:

Equal Dignities Rule

The legal rule that provides that when a party appoints an agent to negotiate an agreement that must be in writing, the appointment of the agent must also be in writing.

Consideration

In contract law, something of value exchanged between parties that is required for the formation of a legal contract.

Assignment

The transfer of a contract right from one person to another.

Frustration of Purpose

A legal defense allowing parties to terminate a contract when an unforeseen event undermines the contract's principal purpose, rendering it impossible to fulfill.