Which of the Following Is the Main Lesson That Analysts

question 64

Multiple Choice

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

• A)The usefulness of financial statements to investors is entirely dependent on the ethics of those constructing them.
• B)The information in financial statements should be viewed extremely critically.
• C)It is not possible to effectively evaluate a company unless all the financial statements are fully and correctly prepared.
• 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.

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Definitions:

Statutory Ratification

The process by which a legislative body formally approves an action, treaty, or agreement previously enacted or signed.

Overissued Shares

Stock shares that have been erroneously or unlawfully issued beyond the number authorized by the company's charter.

Debt

Money owed by one party (the debtor) to another (the creditor), typically arising from a transaction of financial borrowing.

Equity Securities

Financial instruments representing ownership interest in a company, such as stocks.