Relying on Absolute Values in an Entity's Financial Statements to Predict

question 9

Multiple Choice

Relying on absolute values in an entity's financial statements to predict future risks is not meaningful because:

• A) an increase in the profit figure does not necessarily indicate an increase in the profitability of the entity.
• B) an increase in non-current liabilities does not necessarily mean the entity has become more reliable on external funding.
• C) an increase in current liabilities does not necessarily mean the entity is having liquidity problems.
• D) all of the above statements are correct.

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Definitions:

Four Quadrant Model

A framework often used in various fields to categorize or analyze information in four distinct categories or quadrants, based on two sets of bipolar dimensions.

Organizational Culture

The set of shared beliefs, values, norms, and practices that characterizes an institution or organization.

Organizational Culture

The shared values, beliefs, customs, and practices that characterize the social and psychological environment of an organization.

Subculture

A culture within a larger culture, often having beliefs or interests at variance with those of the larger culture.