When Compiling the Financial Statements of a Private Company, an Accountant

question 15

Multiple Choice

When compiling the financial statements of a private company, an accountant should

• A)Review agreements with financial institutions for restrictions on cash balances.
• B)Study and understand the client's business.
• C)Inquire of key personnel concerning related parties and subsequent events.
• D)Perform ratio analyses of the financial data of comparable prior periods.

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Definitions:

Required Rate

The minimum return that investors expect or the company estimates it needs to generate from a capital investment or project to consider it viable.

Maximum Price

The highest price that a trader, investor, or consumer is willing to pay for a security or good.

Required Rate

The minimum expected rate of return on an investment, set by investors based on risk levels and economic conditions.

Expected Growth Rate

The projected rate at which a company's earnings or revenue are anticipated to grow.