In Examining the Issue of Whether the Choice of Accounting

question 26

Multiple Choice

In examining the issue of whether the choice of accounting methods affects share prices,studies have found that:

• A)accounting depreciation methods can significantly affect share prices.
• B)switching depreciation methods can significantly affect share prices.
• C)accounting changes that increase accounting earnings also increases share prices.
• D)accounting changes can affect share prices if the company were either to withhold information or provide incorrect information.
• E)All of the above.

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Definitions:

Restrictive Covenants

Provisions in a contract or loan agreement that limit the borrower's actions, intended to protect the lender by maintaining the borrower's creditworthiness.

Call Provision

A clause in a bond contract that allows the issuer the right to redeem the bond before its maturity date under specific conditions.

Par Value

The nominal or face value of a bond, share of stock, or coupon as stated by the issuer, often used in the calculation of interest payments and dividends.

Coupon Rate

The annual interest rate paid by a bond expressed as a percentage of the bond's face value.