Which of the Following Is an Argument Supporting the "Current

question 24

Multiple Choice

Which of the following is an argument supporting the "current operating" income recognition school of thought?

• A)Most financial statement users look only to bottom-line net income to assess current performance and to make predictions regarding subsequent years' performance.
• B)Under this approach, management makes the decision on whether or not an item is extraordinary and therefore excluded from the income statement.
• C)The summation of all income displayed on the income statement for a period of years should reflect the reporting entity's net income for that period.
• D)Proper classification within the income statement allows both normal recurring items and unusual, infrequently occurring items to be displayed separately within the same statement.

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Definitions:

Compounded Monthly

Interest calculation method where interest earned is added to the principal balance each month, affecting future interest calculations.

Rate of Return

The net profit or net loss recorded on an investment within a certain interval, articulated as a percentage of the investment's initial pricing.

Cash Flows

Cash flows describe the total net cash and equivalents moving into and exiting a company.

Rate of Return

The positive or negative change in an investment's value over a determined period, indicated as a percentage of the investment’s buying price.