What Is a Significant Problem with Using Conventional Accounting Measures

question 17

Multiple Choice

What is a significant problem with using conventional accounting measures of profit, or profit-based ratios?

• A) All sources of revenue to the business are not considered in traditional methods.
• B) Electronic data processing methods are demonstrating that these measures are obsolete.
• C) Accounting measures include the opportunity cost of shareholder equity, understating net income.
• D) There is often a mixture of historic values with current market values in the calculations.
• E) Risk, a qualitative intangible, is a factor in the calculation of income.

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Definitions:

Tractor Protection Valve

A safety valve in air brake systems that prevents air loss in the tractor, preserving air for control of the trailer's brakes.

Secondary Circuit

In electrical systems, a secondary circuit is a part of the circuit that is downstream from the transformer or another isolation device, which operates at a lower voltage than the primary circuit.

Tandem Drive Axle

A configuration involving two drive axles placed in line with each other, used in heavy vehicles to support more weight and improve traction.

Service Braking

The primary braking system used in vehicles for regular stopping and speed control, as opposed to auxiliary or emergency braking.