Which of the Following Statements Is CORRECT

question 41

Multiple Choice

Which of the following statements is CORRECT?

• A)Assets other than cash are expected to produce cash over time, and the amounts of cash they eventually produce should be exactly the same as the amounts at which the assets are carried on the books.
• B)The primary reason the annual report is important in finance is that it is used by investors when they form expectations about the firm's future earnings and dividends, and the riskiness of those cash flows.
• C)The annual report is an internal document prepared by a firm's managers solely for the use of its creditors/lenders.
• D)The four most important financial statements provided in the annual report are the balance sheet, income statement, cash budget, and statement of stockholders' equity.
• E)Prior to the Enron scandal in the early 2000s, companies would put verbal information in their annual reports, along with the financial statements. That verbal information was often misleading, so today annual reports can contain only quantitative information: audited financial statements.

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Definitions:

Income Statement Accounts

Accounts that reflect income, expenses, gains, and losses, which are used to determine the net income of a business.

Deferred Revenue

Income received by a company for products or services yet to be delivered or completed, considered a liability until the revenue is earned.

Unearned Rent

Income received by a property owner for which the services (use of property) have not yet been provided.

Expense Accounts

Accounts used to track money spent or costs incurred in a business's operational activities.