The FASB Stresses That the Primary Objective of Financial Reporting

question 59

Multiple Choice

The FASB stresses that the primary objective of financial reporting is to provide information useful to investors and creditors in assessing the amount,timing,and uncertainty of future net cash flows.The FASB contends that

• A)users pay attention to firms' accounting earnings because this accrual measure of periodic firm performance improves their ability to forecast companies' future cash flows.
• B)information about current cash receipts and payments is the most pertinent for this task.
• C)users pay attention to managements' estimates of free cash flows because this information improves their ability to forecast companies' future cash flows.
• D)current cash flows outperform current earnings in predicting future cash flows.

Understand the importance of cost/benefit analysis in decision-making.

Recognize the influence of uncertain and risk environments on managerial decisions.

Differentiate between classical and behavioral decision theories.

Understand the concept of bounded rationality in decision-making.

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Definitions:

Flowering Plants

Plants that produce flowers for reproduction, belonging to the angiosperm group, which includes a vast majority of the world's plant species.

Stamens

The pollen-producing reproductive organ of a flower, consisting of an anther and a filament.

Carpels

The female reproductive organs of a flower, consisting of an ovary, a stigma, and usually a style, which can develop into fruits and seeds after fertilization.

XIST Gene

A gene that is crucial for X-chromosome inactivation, a process that occurs in females to prevent the overexpression of X-linked genes.