If Management Decides to Use an Inventory Method That Will

question 1

Multiple Choice

If management decides to use an inventory method that will provide them with a higher net income, this is an example of:

• A) Legitimate discretion.
• B) Financial statement fraud.
• C) Manipulation.
• D) Aggressive accounting techniques.

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Definitions:

Long-term Investments

Investments made with the intention to hold for more than one year, typically in bonds, stocks, or real estate, aiming for long-term capital growth.

Quick Ratio

A financial ratio that measures the ability to pay current liabilities with quick assets (cash, marketable securities, accounts receivable).

Account Payable

Financial obligations or debts owed by a business to its suppliers or creditors for goods and services received.

Fixed Assets

Long-term tangible assets, such as buildings, machinery, and equipment, used in the operations of a business and not expected to be consumed or converted into cash within a year.