Which One of the Following Statements Related to Unexpected Returns

question 45

Multiple Choice

Which one of the following statements related to unexpected returns is correct?

• A) All announcements by a firm affect that firm's unexpected returns.
• B) Unexpected returns over time have a negative effect on the total return of a firm.
• C) Unexpected returns are relatively predictable in the short-term.
• D) Unexpected returns generally cause the actual return to vary significantly from the expected return over the long-term.
• E) Unexpected returns can be either positive or negative in the short term but tend to be zero over the long-term.

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Definitions:

GAAP

Generally Accepted Accounting Principles; the standard framework of guidelines for financial accounting used in any given jurisdiction.

Reliability

In accounting, it refers to the accuracy and consistency of financial reporting, ensuring that information faithfully represents the entity's financial condition.

Materiality Constraint

An accounting principle that permits ignoring rules following the generally accepted accounting principles (GAAP) if the impact of adhering to them is so insignificant that it would not affect the decision-making process of someone reading the financial statements.

Unusual Gain

Gains that are not expected to recur frequently or regularly, arising from events not considered part of the ordinary activities of a business.