Which of the Following Statements Is CORRECT

question 63

Multiple Choice

Which of the following statements is CORRECT?

• A) The income statement for a given year is designed to give us an idea of how much the firm earned during that year.
• B) The focal point of the income statement is the cash account,because that account cannot be manipulated by "accounting tricks."
• C) The reported income of two otherwise identical firms cannot be manipulated by different accounting procedures provided the firms follow Generally Accepted Accounting Principles (GAAP).
• D) The reported income of two otherwise identical firms must be identical if the firms are publicly owned,provided they follow procedures that are permitted by the Securities and Exchange Commission (SEC).
• E) If a firm follows Generally Accepted Accounting Principles (GAAP),then its reported net income will be identical to its reported net cash flow.

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Definitions:

Standardized Test

A test administered and scored in a consistent manner to ensure uniformity across different test takers or groups.

Test Statistic

A calculated value from sample data used to make decisions about the validity of a hypothesis.

Two-tail Test

A statistical test where the critical area of a distribution is two-sided and tests whether a sample is greater than or less than a certain range of values.

P-value

The probability of observing results as extreme as those observed in a study, under the assumption that the null hypothesis is true.