The Four Principal Qualitative Characteristics That Make Information in Financial

question 22

Multiple Choice

The four principal qualitative characteristics that make information in financial statements useful to investors identified within The Framework are:

• A) Relevance, reliability, timeliness and comparability
• B) Timeliness, reliability, relevance and understandability
• C) Comparability, understandability, relevance and reliability
• D) Comparability, understandability, timeliness and reliability

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Definitions:

Principal-Agent Problem

A dilemma arising from conflicts of interest between a principal (e.g., an employer or shareholder) and an agent (e.g., an employee or manager) when the agent is motivated to act in his own best interests rather than those of the principal.

Banking Industry

A sector of the economy comprising institutions that offer financial services, such as deposit accounts, loans, and currency exchange.

United States

A country in North America consisting of 50 states, a federal district, five major self-governing territories, and various possessions.

Incentive

A factor, either monetary or non-monetary, that motivates individuals or firms to act in a certain way.