An Item Would Be Considered Material and Therefore Would Be

question 36

Multiple Choice

An item would be considered material and therefore would be disclosed in the financial statements if the

• A) expected benefits of disclosure exceed the additional costs.
• B) impact on earnings is greater than 3 percent.
• C) FASB definition of materiality is met.
• D) omission of misstatement of the amount would make a difference to the users.

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Definitions:

Debt-Equity Ratio

A financial ratio portraying the comparative financing approach using debt and equity for assets.

Plowback Ratio

The proportion of earnings that a company retains and reinvests into its operations rather than distributing as dividends.

Dividend Payout Ratio

The fraction of net income a firm pays to its shareholders in dividends, expressed as a percentage.

Operating Capacity

The maximum output or production level that a facility or business can achieve under normal circumstances.