A Financial Analyst Is Comparing Two Companies

question 93

Multiple Choice

A financial analyst is comparing two companies.Which of the following would cause major problems in the evaluation process?

• A)One company has a fiscal year that ends on October 31,while the other company has a fiscal year that ends on August 31.
• B)One company reported nonoperating activities,while the other company did not.
• C)The companies operate in different industries.
• D)Inflation has been low for the past several years.

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Definitions:

After-tax Effect

The impact of taxes on a company's financial transactions, typically focusing on the net result after accounting for the taxation impact.

Accounting Policies

The distinct protocols, core principles, guidelines, directives, and procedures followed by a company for the preparation and presentation of its financial reports.

Retrospective Adjustment

An adjustment applied to the financial statements of prior periods to correct an error or to reflect a change in accounting policy as if that policy had always been applied.

Share Options

Rights granted by a company to its employees or executives to purchase shares of the company's stock at a predetermined price.