Which of the Following Statements Is CORRECT

question 46

Multiple Choice

Which of the following statements is CORRECT?

• A) The focal point of the income statement is the cash account because that account cannot be manipulated by "accounting tricks."
• B) The reported income of two otherwise identical firms cannot be manipulated by different accounting procedures provided the firms follow generally accepted accounting principles (GAAP).
• C) The reported income of two otherwise identical firms must be identical if the firms are publicly owned,provided they follow procedures that are permitted by the Securities and Exchange Commission (SEC).
• D) If a firm follows generally accepted accounting principles (GAAP),then its reported net income will be identical to its reported cash flow.
• E) The income statement for a given year is designed to give us an idea of how much the firm earned during that year.

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Definitions:

Maximize Profits

A business objective aiming to achieve the highest possible financial gain from operations.

Economic Profit

The surplus remaining after total costs (both explicit and implicit) are deducted from total revenue, reflecting the true profitability of a firm.

ATC

Average Total Cost, which is the total cost divided by the quantity of output produced, reflecting the cost per unit of output.

Pure Monopolist

A market structure where a single seller dominates the market, with no rivals, supplying a unique product without close substitutes.