Which of the Following Should Be Attempted in Order to Gauge

question 36

Multiple Choice

Which of the following should be attempted in order to gauge the quality of a company's earnings?
I. Assess adequacy of discretionary expenditures
II. Assessing degree of conservatism in reporting assets
III. Assessing degree of conservatism in reporting liabilities
IV. Assessing degree of conservatism in application of accounting principles

• A) I, II, III and IV
• B) I, II and IV
• C) II, III and IV
• D) I, III and IV

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Definitions:

Current Ratio

A measurement indicating how well a business can cover its short-term debts with its available assets, made by dividing current assets by current liabilities.

Financial Statements

Official records that outline the financial activities and condition of a business, individual, or other entity.

Average Collection Period

The mean number of days a company waits to get payments from customers for products or services provided on credit.

Balance Sheet

A document showcasing a corporation's assets, obligations, and the equity held by shareholders on a specific date.