A Limitation of Using Past Performance as a Basis for Judging

question 175

Multiple Choice

A limitation of using past performance as a basis for judging actual results is that ________.

• A) future conditions can be different from the past
• B) any undervaluation of profits in the past period is likely to continue
• C) any subsequent change in accounting treatment will distort performance evaluation
• D) they tend to distort results when current and past conditions are similar

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Definitions:

Base Year

Base year is a specific year against which economic growth or other market indices are measured, serving as a standard or reference point for economic analysis.

CPI

The Consumer Price Index reflects the weighted average price changes in a variety of consumer goods and services, such as medical services, food, and transportation.

Goods and Services

Physical products (goods) and intangible assistance or benefits (services) produced to satisfy the wants and needs of consumers.

Consumer Price Index

An index measuring the change over time in the prices paid by urban consumers for a market basket of consumer goods and services.