Which of the Following Is the Main Lesson That Analysts

question 4

Multiple Choice

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

• 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.

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Definitions:

Marginal Utility

The additional satisfaction or benefit received by consuming one more unit of a good or service.

Budget Line

A representation of all possible combinations of two goods that an individual can afford given their income and the prices of the goods.

Income-Consumption Curve

A graphical representation showing how a consumer's optimal bundle of goods varies with changes in income.

Price Elasticity

A measure reflecting the impact of price variations on the demand for a particular product.