Which of the Following Is the Main Advantage of Using

question 17

Multiple Choice

Which of the following is the main advantage of using accounting earnings instead of share prices to determine bonuses?

• A) Share prices are influenced by market forces that are outside the control of management.
• B) Accounting information is independently audited.
• C) Accounting information is unbiased.
• D) Share prices may be manipulated by managers engaging in insider trading.

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Definitions:

Equilibrium Price

The price at which the quantity of a good demanded by consumers equals the quantity supplied by producers, leading to a state of market equilibrium.

Equilibrium Price

The cost at which the amount of a product that buyers want to purchase matches the amount that sellers are willing to supply, creating equilibrium in the market.

Marginal Cost

Marginal cost is the increase in total cost that arises from producing one additional unit of a product or service.

Total Variable Costs

The sum of all costs that vary directly with the level of production, such as materials and labor directly involved in the production process.