If a Firm Has an ROA of 10% and an ROE

question 16

Multiple Choice

If a firm has an ROA of 10% and an ROE of 10%, then the

• A) operating results of the firm are improving.
• B) firm has no financial leverage.
• C) firm must have enough cash on hand to pay some extra dividends.
• D) firm is losing money.

Identify the assumptions, principles, and limitations in the conceptual framework for financial reporting.

Understand the AICPA Special Committee's comprehensive model of business reporting and its categories.

Be familiar with the process and results of the FASB's conceptual framework projects.

Identify and understand the qualitative characteristics of financial information as identified by GAAP.

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Definitions:

Theater Tickets

Documents that grant the holder the right to enter a theater and see a performance.

Performance

The act of executing or accomplishing work, tasks, or duties, often measured against predefined standards.

Prepaid Rent

Represents the payment of rent in advance before it is due, recorded as an asset on the balance sheet until it is expensed.

Deferral

An accounting concept where revenue or expense is recognized at a date later than the point when cash was originally exchanged.