Indicate Whether Each of the Following Statements About Financial Statement

question 96

Short Answer

Indicate whether each of the following statements about financial statement analysis is true or false.
_____ a) Comparing percentages derived from financial statement analysis has the drawback of varying materiality levels.
_____ b) The materiality of accounting information refers to whether it is viewed as favorable (good news) or unfavorable (bad news).
_____ c) Companies must account for immaterial items in compliance with generally accepted accounting principles.
_____ d) To judge the materiality of an absolute financial statement amount, one must consider the size of the company reporting it.
_____ e) Meaningful comparisons between two companies generally should be made using percentage analysis or ratio analysis, not absolute amounts.

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Definitions:

Tax

A compulsory financial charge or some other type of levy imposed upon a taxpayer by a governmental organization to fund government spending and various public expenditures.

Comparative Advantage

The ability of an individual, company, or country to produce a good or service at a lower opportunity cost than competitors.

Exports

Products or services originating from one country and sold to buyers located in a different country.

Imports

Goods and services bought by a country from other countries. Imports can include a wide range of items, from raw materials to finished goods.