Which of the Following Statements Is True

question 35

Multiple Choice

Which of the following statements is true?

• A)It is better for shareholders if management errs on the side of conservatism when reporting its earnings.
• B)Laws preventing insider trading are in the best interest of the external shareholders of the firm.
• C)Insider trading is always illegal, but there are legal ways in which management may manipulate the earnings it reports.
• D)Both insider trading and earnings manipulation may be either legal or illegal, depending on whether certain guidelines are followed.

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Definitions:

Ratio Analysis

A quantitative method of gaining insight into a company's liquidity, operational efficiency, and profitability by comparing line items on financial statements.