Which of These Is a Common Fraud in Financial Reporting

question 18

Multiple Choice

Which of these is a common fraud in financial reporting?

• A)improper revenue recognition.
• B)understating inventory.
• C)overstating liabilities.
• D)understating assets.

---

Definitions:

Capital Gains Yield

The price appreciation component of the total return on an investment, excluding any dividends or interest.

Debt-Equity Ratio

A ratio representing the degree of financial leverage of a company, calculated through the division of its total liabilities by shareholders' equity.

After-Tax Cost of Debt

The total expense of borrowing for a business, after subtracting the tax savings gained from deducting interest expenses.

Weighted Average Cost of Capital (WACC)

A calculation of a firm's cost of capital, weighting each category of capital (equity, debt, etc.) proportionally.