According to PCAOB Standards for Reporting on Internal Control,performing the LIFO

question 13

Multiple Choice

According to PCAOB standards for reporting on internal control,performing the LIFO calculation or adjusting investments to fair value is referred to as:

• A)Substantive transactions.
• B)Routine transactions.
• C)Nonroutine transactions.
• D)Accounting Estimate transactions.

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Definitions:

ROE

Return On Equity, a measure of financial performance calculated by dividing net income by shareholders' equity.

Financial Leverage

The use of borrowed funds to increase a company's investment potential, which can amplify both potential returns and potential losses.

Operating Leverage

Operating leverage refers to the degree to which a company or project can increase operating income by increasing revenue.

Total Leverage

The combination of operating leverage (affecting operating income) and financial leverage (affecting net income), indicating total risk.