Two or More Operating Segments Can Be Combined into a Single

question 7

Multiple Choice

Two or more operating segments can be combined into a single operating segment, if they share similarities in the following area EXCEPT for:

• A)​They have the same type of class of customer for their products and services.
• B)​The production processes are of the same nature.
• C)​They share the same accounting periods and are consistent in their accounting methods.
• D)​They share the same distribution channels of their products and/or services.

Comprehend the significance of financial analysis beyond the mechanical computation of ratios.

Understand the methodology and importance of time-series and comparative analyses.

Grasp the concept of the DuPont model in dissecting ROE into component ratios.

Recognize the different bases used in preparing component percentages and their implications.

---

Definitions:

Temporary Accounts

Accounts used to collect revenues, expenses, and dividends information which are then transferred to permanent accounts at the end of the accounting period.

Closed

Refers to an account or period that has been concluded and no longer accepts entries or transactions.

Accrual Basis

An accounting method where revenues and expenses are recorded when they are earned or incurred, regardless of when the cash is exchanged.

Adjusting Entries

Journal entries made in the accounting records at the end of an accounting period to allocate income and expenditures to the period in which they actually occurred.