All of the Following Are Accounting Factors That Can Drive

question 45

Multiple Choice

All of the following are accounting factors that can drive a firm's price-earnings ratio in a given period to be higher than that of other firms in the same industry except:

• A) non-recurring expenses or losses in that period
• B) a greater degree of accounting conservatism that requires expensing R&D or other intangible asset-generating activities
• C) a less conservative accounting stance that uses straight-line depreciation rather than accelerated methods
• D) a greater degree of accounting conservatism regarding accelerated depreciation of PP&E

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Definitions:

Break-even Chart

A graphical representation showing the point at which total costs and total revenues are equal, indicating no net loss or gain.

Fixed Costs

Fixed costs are expenses that do not change with the level of production or sales, such as rent, salaries, and insurance.

Variable Costs

Costs that change in proportion to the level of production or business activity.

Profit

The financial gain made in a transaction or operation, calculated as the difference between revenue and expenses.