In Recognizing a Decline in the Fair Value of Short-Term

question 69

Multiple Choice

In recognizing a decline in the fair value of short-term stock investments an unrealized loss account is debited because

• A) management intends to realize this loss in the near future.
• B) the securities have not been sold.
• C) the stock market is volatile.
• D) management cannot determine the exact amount of the loss in value.

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Definitions:

Price/Earnings Ratio

A metric that measures the relationship between a company's stock price and its per-share earnings, providing insight into the market's valuation of the company.

Earnings Per Share

A company's profit divided by the number of outstanding shares of its common stock, indicating the company's profitability on a per-share basis.

Cash Coverage Ratio

A liquidity ratio that measures a company’s ability to pay off its debt with cash and cash equivalents, indicating financial health.

Operating Activities

The section of a company's cash flow statement that reveals the cash generated or used in the company’s primary business operations.