The Quality of Earnings Is Considered to Be Higher When

question 70

Multiple Choice

The quality of earnings is considered to be higher when ________.

• A)the internal and external risks of the company are higher
• B)revenues are recognized early or expenses are postponed to a later period
• C)the company has an incentive-based compensation plan for executives that is tied to earnings per share
• D)management chooses accounting methods that result in conservative earnings

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Definitions:

Face Value

The nominal value or dollar value printed on a security, such as a bond or stock, which indicates its worth at issuance or maturity.

Interest Payment

A payment made to a lender by a borrower in exchange for the use of borrowed money, typically a percentage of the principal.

Insulation Job

A service or project involving the application of insulating materials to buildings or structures to reduce energy consumption by maintaining temperature.

Annual Fuel Bill

The total cost incurred by an individual or organization for fuel over the course of a year.