The Consistency Principle

question 49

Multiple Choice

The consistency principle

• A) Requires a company to use the same accounting methods period after period
• B) Requires a company to use one cost flow assumption exclusively
• C) Allows a company to change its cost flow assumption period after period in order to maximize net income
• D) Is also called the matching principle
• E) Allows a company to change its cost flow assumption period after period in order to minimize income taxes

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Definitions:

Marginal Tax Rate

The percentage of tax applied to your income for each tax bracket in which you qualify.

Leveraged Buyouts

The acquisition of another company using a significant amount of borrowed money (bonds or loans) to meet the cost of acquisition.

Public Shareholders

Individuals or entities that own shares of stock in publicly traded companies.

Debt Flotation Costs

Fees and expenses incurred by an issuer of debt when offering new securities to investors.