The Use of Financial Statements for Predicting Future Earnings and Cash

question 83

Multiple Choice

The use of financial statements for predicting future earnings and cash flows is limited due to

• A)management bias, lack of forward-looking information, and certain inherent limitations.
• B)lack of judgment, management bias, and lack of inclusion of inflationary effects.
• C)lack of forward and backward-looking information.
• D)lack of backward-looking information, the likelihood of management bias, and the omission of historical costs.

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Definitions:

Red Herring Fallacy

A logical fallacy where irrelevant information is presented to distract from the actual issue.

False Dichotomy

A logical fallacy that presents two opposing options as the only possibilities, when in fact more options may exist.

Appeal to Popularity

The appeal to popularity is a logical fallacy that suggests something is true, good, or desirable simply because it is popular or widely accepted by many people.

Complexity

The state or quality of being intricate or complicated.