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:

Conflict of Interest

A situation in which a person or entity has competing interests or loyalties that could potentially influence the objectivity of their decisions.

Securities Broker

A professional intermediary who facilitates the purchase and sale of securities on behalf of clients.

Rule 504

A provision of Regulation D of the U.S. Securities and Exchange Commission that allows companies to freely sell up to $5 million of securities in a 12-month period without extensive registration.

General Solicitations

Activities by companies to advertise or solicit a wider range of investors or the public at large, typically related to the offering of securities.