An Increase in Reported Net Profit in the Short Term

question 5

Multiple Choice

An increase in reported net profit in the short term will occur from:

• A) overestimating the useful life of a non-current asset
• B) writing off supplies that are still on hand as an expense
• C) underestimating the residual value of a depreciable asset
• D) choosing the reducing balance rather than the straight-line method of depreciation

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Definitions:

Companies

Legal entities formed of individuals, shareholders, or members, aimed at operating for profit.

Excess Return

The return on an investment that exceeds the risk-free rate or a comparative benchmark or index.

Merger

A corporate strategy of combining distinct businesses under a single entity to enhance competitiveness and efficiency.

Shareholders

Shareholders are individuals or entities that own shares in a corporation, thus holding a portion of its ownership and rights to profits.