In Order to Overstate Earnings, a Company Can

question 131

Multiple Choice

In order to overstate earnings, a company can:

• A)overstate expenses and overstate revenue.
• B)overstate receivables and understate payables.
• C)understate unearned revenue and understate property, plant and equipment.
• D)understate expenses and understate revenue.

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Definitions:

Cash Flows

Movements of money into and out of a business or an account that are used to measure financial health or operational effectiveness.

Working Capital

A measure of a company's operational liquidity, calculated as current assets minus current liabilities.

Net Present Value

A financial metric that represents the difference between the present value of cash inflows and outflows over a period of time.

Cash Outflow

Financial transactions that result in the outflow of money from a business, including payments for expenses, investments, and loans.