Question
1. A) A companys balance sheet reports stockholders equity of $2 billion, yet the same company has a market value of $20 billion. What factors
1.
A) A companys balance sheet reports stockholders equity of $2 billion, yet the same company has a market value of $20 billion. What factors cause such a significant difference in the value of a company on the balance sheet vs. the stock market?
B) An asset is expected to be converted to cash in 18 months. Are there any circumstances in which this item would be classified as current on the balance sheet?
C) A liability is due three months from now. Are there any circumstances in which this item would be classified as non-current on the balance sheet?
D) You are considering investing in a company that recently reported a $700 million profit in the last fiscal year. However, your trusty accounting professor warned you that the companys quality of earnings was very low. What does your professor mean? What factors could make a companys quality of earnings low?
E) Differentiate between the retrospective and prospective approaches to reporting a change in accounting principle.
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