What Is the Purpose of Fraudulent Financial Reporting

question 92

Multiple Choice

What is the purpose of fraudulent financial reporting?

• A)Net income and total assets are understated so managers can receive their bonuses.
• B)Net income and total assets are overstated so managers can receive their bonuses.
• C)A company can borrow money that would not otherwise be available.
• D)B and C

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Definitions:

Depreciation

The accounting method of allocating the cost of a tangible asset over its useful life, reflecting wear and tear, deterioration, or obsolescence.

Interest Expense

The cost incurred by an entity for borrowed funds over a period of time, typically expressed as an annual rate.

Cash Coverage Ratio

A financial metric that measures a company’s ability to cover its debt obligations with its operating cash flow.

Total Asset

The sum of all assets owned by a company, including both current and non-current assets.