Management's Routine Use of Non-Fraudulent Accounting and Economic Discretion to Smooth

question 22

Multiple Choice

Management's routine use of non-fraudulent accounting and economic discretion to smooth earnings is called:

• A) Financial manipulation.
• B) Earnings management.
• C) Corporate financial management.
• D) Asset management.

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Definitions:

Well-diversified Portfolio

An investment portfolio spread across different assets to reduce exposure to risk associated with any single investment.

Standard Deviation

A measure of the amount of variation or dispersion of a set of values, commonly used in finance to assess the volatility of an investment.

Single-index Model

A model of stock returns that decomposes influences on returns into a systematic factor, as measured by the return on a broad market index, and firm-specific factors.