For External Reporting Purposes, U

question 206

Multiple Choice

For external reporting purposes, U.S. GAAP allows companies to use

• A)either the traditional format or the contribution margin format.
• B)only the contribution margin format of the income statement.
• C)only the traditional format of the income statement.
• D)the variable costing format.

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Definitions:

Floatation Costs

The total costs associated with a company issuing new stocks or bonds, including underwriting, legal, registration, and other expenses.

Dividend Irrelevance Theory

A theory proposed by Modigliani and Miller that suggests dividend policies do not affect a company’s capital structure or stock price in a perfect market.

Dividend Policy

A company's approach to distributing profits back to its shareholders, whether through cash dividends or share repurchases.

Dividend Irrelevance Theory

A theory suggesting that the dividend policy of a company is irrelevant to its value or the cost of capital and investment decisions.