It Is Easier to Evaluate a Firm Using Financial Statements

question 52

Multiple Choice

It is easier to evaluate a firm using financial statements when the firm:

• A)is a conglomerate.
• B)has recently merged with its largest competitor.
• C)uses the same accounting procedures as other firms in the industry.
• D)has a different fiscal year than other firms in the industry.
• E)tends to have many one-time events such as asset sales and property acquisitions.

---

Definitions:

Double Counting

The error of including the same item or financial transaction more than once in a calculation or analysis, leading to inaccurate results.

Fair Value Option

An accounting strategy allowing companies to choose to value and report certain assets and liabilities at fair market prices.

Equity Method Investments

An accounting technique used by a company to record its investment in another company, where the investment gives the investor a significant influence over the investee.

Account For

Refers to the process of recording financial transactions in the financial statements.