Research Indicates That All of the Following Statements Are Correct

question 51

Multiple Choice

Research indicates that all of the following statements are correct, except:

• A) Stock price movements are more closely related to income statement information than cash flow information.
• B) Useful (but not perfect) models exist that use financial statement data to predict company bankruptcy.
• C) Useful (but not perfect) models exist that use financial statement data to detect improper reporting of financial information.
• D) Stock price movements are greater when a change in income is due to one-time items than when the change in income is due to persistent items.

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Definitions:

Purchase Discount

A reduction in price granted by a supplier to a buyer for early payment of an invoice.

Freight-In

The cost associated with transporting goods into a warehouse or to the buyer, often included in the inventory cost.

Installation

The act of setting up or assembling machinery, equipment, software, or hardware to make it ready for operation.

Fully-Depreciated

A state where an asset has reached the end of its useful life for accounting purposes, with its book value equaling its salvage value or zero.