The Cost Constraint

question 136

Multiple Choice

The cost constraint

• A) means that assets and revenues should be estimated at the lower end of their range.
• B) means that assets and revenues should be estimated at the higher end of their range.
• C) means the value of the information is not less than the cost to produce the information.
• D) means the information would influence the decisions of a user of the financial information.

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Definitions:

Preferred Stock

A class of ownership in a corporation that has a higher claim on assets and earnings than common stock and usually receives dividends before common shareholders.

Convertible

Refers to a security, usually a bond or a preferred stock, that can be converted into a specified number of shares of common stock.

Common Stock

A type of security that signifies ownership in a corporation, entitling the shareholder to a share of the corporation's profits and assets.

Consolidated Earnings Per Share

A calculation of the earnings per share of a parent company and its subsidiaries, providing a measure of the combined profitability on a per-share basis.