The Matching Principle States That

question 51

Multiple Choice

The matching principle states that

• A)Expenses should be matched with specific jobs.
• B)Expenses should be matched with revenues they generate.
• C)Revenues should be recorded in the period in which the payment is received.
• D)Expenses should be matched to assets which generated the expenses.

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Definitions:

Price-Earnings Ratio

A metric used to value a company by comparing its current stock price to its earnings per share.

Net Present Value

This is a calculation that estimates the value of an investment adjusted for its time value of money, essentially determining the present value of its future cash flows minus the initial investment.

Fixed Assets

Tangible assets, such as buildings and machinery, used in operations and not intended for resale, providing long-term financial benefit.

Rights Offering

A financial mechanism by which existing shareholders are given the right to buy additional shares directly from the company, usually at a discount to the current market price.