Which of the Following Is the Main Lesson That Analysts

question 99

Multiple Choice

Which of the following is the main lesson that analysts and investors should take from the case of Enron?

• A)The usefulness of financial statements to investors is entirely dependent on the ethics of those constructing them.
• B)It is not possible to effectively evaluate a company unless all the financial statements are fully and correctly prepared.
• C)The information in financial statements should be viewed extremely critically.
• D)Readers of even fraudulent financial statements can spot signs of a firm's financial health if those statements are read fully and with care.
• E)Financial statements are too easily manipulated and cannot be taken at face value.

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Definitions:

Fair Value

Fair value is an estimate of the market value of an asset or liability, based on current prices in an active market or through valuation techniques.

Financial Statements

Reports that provide detailed information on a company's financial performance, including balance sheet, income statement, and cash flow statement.

Fair Value Method

An accounting approach used to assess and assign a value to assets or liabilities based on current market prices or the estimated prices of similar transactions.

Net Income

The conclusive income of a corporation post all deductions for costs and taxes from its aggregate revenue.