Which of the Following Items Is Consistent with Earnings Being

question 47

Multiple Choice

Which of the following items is consistent with earnings being informative about current performance and informing the analyst that level of current earnings is sustainable?

• A) The firm recognizes an unexpected gain
• B) The firm recognizes a fair value gain on a financial asset as a result of a favorable move in interest rates.
• C) The firm recognizes additional expenses this period due to pre-opening costs associated with new stores.
• D) The firm experiences a large jump in sales and earnings as a result of successful research and development of new products.

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Definitions:

Accepted

Recognized as true or valid; in the context of contracts, to agree to the terms of an offer.

Perishable Goods

Items, especially foodstuffs, that are subject to spoilage and decay in a short period of time if not properly cared for.

Merchant

A person or company engaged in the trade of goods, specifically in the context of consumer protection laws, someone dealing in goods of the kind involved in the transaction.

Reasonable Effort

The degree of diligence and attention expected under certain circumstances, typically what a reasonable person would do.