Which of the Following Best Describes Why the Predicted Incremental

question 8

Multiple Choice

Which of the following best describes why the predicted incremental earnings arising from a given decision are not sufficient in and of themselves to determine whether that decision is worthwhile?

• A)They do not tell how the decision affects the firm's reported profits from an accounting perspective.
• B)They are not easily predicted from historical financial statements of a firm and its competitors.
• C)These earnings are not actual cash flows.
• D)They do not show how the firm's earnings are expected to change as the result of a particular decision.
• E)They do not tell us how profits change from an accounting perspective.

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Definitions:

Respondeat Superior

A legal doctrine that holds an employer or principal legally responsible for the wrongful acts of an employee or agent, when such acts occur within the scope of employment or agency.

Liability Policies

Insurance policies that offer protection against claims resulting from injuries and damage to people and/or property.

Insurable Interest

A principle requiring a person to have a legitimate financial or other interest in the life, property, or well-being of the insured subject, to obtain insurance for it.

Property Insurance

Insurance that provides protection against most risks to property, such as fire, theft, and some weather damage.