Which of the Following Statements Best Describes Considerations Regarding a Company's

question 58

Multiple Choice

Which of the following statements best describes considerations regarding a company's tax expense that users of GAAP financial statements may make?

• A) The breakdown of tax expense between current and deferred may provide useful information regarding the comparison of tax burdens between companies.
• B) An analysis of earnings before interest, taxes, depreciation, and amortization EBITDA) is often a better approach to comparing the operating results of two companies.
• C) One-time effects within a company's effective tax rate should be removed before comparing the effective tax rates across companies or across years for the same company).
• D) All these observations are correct.

---

Definitions:

Relative-price Variability

The fluctuation and differences in price levels of goods and services relative to each other over time.

Efficiently Allocate

The process of distributing resources in a manner that maximizes the effectiveness or utility of their use.

Monetary Neutrality

The economic theory that changes in the money supply only affect nominal variables and have no effect on real variables such as output or unemployment in the long run.

Fisher Effect

An economic theory proposing that the real interest rate is independent of monetary measures, specifically that the nominal interest rate adjusts to expected inflation.