An Overstatement of Earnings Can Inflate a Company's Stock Price

question 135

Multiple Choice

An overstatement of earnings can inflate a company's stock price and may also be used to:

• A)deflate the amount of taxes the corporation pays.
• B)avoid paying raises to employees.
• C)ensure larger bonuses to upper management at year-end.
• D)avoid paying dividends to stockholders.

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Definitions:

Service Accounting System

An accounting system designed to deal with financial transactions and record-keeping in service-oriented businesses.

Departmental Accounting System

An accounting method used to separately track the performance and financial records of different departments within a company.

Service Center

A department or facility providing support services to other units within an organization, often not directly generating profit.

Cost Center

A department or segment of a business wherein costs can be directly attributed, but which does not directly generate revenue.