In Examining the Issue of Whether the Choice of Accounting

question 42

Multiple Choice

In examining the issue of whether the choice of accounting methods affects stock prices,studies have found that

• A)the decision between LIFO and FIFO for inventory accounting can significantly affect stock prices.
• B)a firm can affect its stock price if it either withholds information or provides incorrect information.
• C)accounting changes that increase accounting earnings also increase stock prices.
• D)switching depreciation methods can significantly affect stock prices.
• E)the choice between the percentage-of-completion or the completed-contract method for construction projects affect stock prices.

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Definitions:

Self-Serving Bias

A cognitive bias that involves people attributing their successes to internal factors while blaming failures on external factors.

High Self-Esteem

A positive evaluation of oneself and feeling confident in one's own abilities or worth.

Spotlight Effect

Overestimating others' noticing and evaluating our appearance, performance, and blunders (as if we presume a spotlight shines on us).

External Locus

An external locus of control refers to the belief that outside forces, beyond an individual's control, significantly influence life events and outcomes.