The SEC's 2003 Report to the Congress on "Principles-Based" Accounting

question 45

Multiple Choice

The SEC's 2003 report to the Congress on "principles-based" accounting observed that the first characteristic of objectives-based standards, as dictated by the Sarbanes-Oxley Act, is that any standard must be based on

• A)qualitative characteristics.
• B)transparency.
• C)an improved and consistently applied framework.
• D)the cost-benefit test.

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Definitions:

Dividends Per Share

Dividends per share (DPS) is a financial ratio that indicates how much a company pays out in dividends each year relative to its share price.

Earnings Per Share

A measure of a company's profitability that divides its net earnings available to common shareholders by the outstanding shares.

Quick Ratio

A measure of a company's ability to meet its short-term obligations using its most liquid assets, calculated as (cash + marketable securities + accounts receivable) / current liabilities.

Current Ratio

This ratio assesses a firm's capacity to cover its obligations due in the next year by comparing its current assets to its current liabilities.