The Main Advantage of Using Accounting Earnings Instead of Stock

question 11

Multiple Choice

The main advantage of using accounting earnings instead of stock prices to determine bonuses is that:

• A) Stock 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) Stock prices may be manipulated by managers engaging in insider trading

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Definitions:

Cultural Truisms

Widely held beliefs or norms within a culture that are rarely questioned.

Folk Wisdoms

Traditional beliefs, proverbs, and sayings that are thought to encapsulate the practical knowledge of culture or society.

Operational Definitions

Specific descriptions of concepts and variables in terms of the methods used to measure or manipulate them in research.

A Priori Causal Theories

Theoretical assumptions made ahead of empirical research, based on logical deduction rather than observation or experience.