Which of the Following Items Is Consistent with Earnings Being

question 8

Multiple Choice

Which of the following items is consistent with earnings being informative about current performance but not informative about future earnings?

• A) The firm recognizes an unexpected gain
• B) The firm recognizes a fair value gain on a financial asset as a result of a favorable move in interest rates.
• C) The firm recognizes additional expenses this period due to pre-opening costs associated with new stores.
• D) The firm experiences a large jump in sales and earnings as a result of successful research and development of new products.

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Definitions:

Positive Relationship

A situation where two variables move in the same direction, meaning as one variable increases, the other variable also increases.

Inverse Relationship

A term used to describe a situation where the increase in one variable leads to the decrease in another, and vice versa.

Positive Slope

A line or curve on a graph that inclines upwards, indicating a direct relationship between two variables, such as price and quantity supplied.

Negative Slope

Describes a line or curve on a graph that decreases in value as it moves from left to right.