The Following Information Is Presented from the Financial Statement of Four

question 6

Multiple Choice

The following information is presented from the financial statement of four companies that operate in the same industry, use similar processes, are similar in size, and are competitors in the same market. The data cover Years 2009 to 2012. Based on this limited information, which company likely has the weakest quality of earnings at Year 4 or 2012?

• A) Company 1
• B) Company 2
• C) Company 3
• D) Company 4

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Definitions:

Compete

The act or process of trying to win or do better than others in an activity, market, or situation.

Cooperate

To work together towards a common goal or purpose, often seen in various social, political, and economic contexts.

Cartels

are agreements between competing firms in the same industry to control prices, limit production, or divide markets, in order to increase profits by reducing competition.

Homogeneous Product

A homogeneous product is one that is perceived by consumers as identical in quality and function to a product from another producer.