Question $1$

MCQ

$5$ Marks

Required:

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Answer all the questions on the paper in the space provided below.

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A company's financial statements reflect information about:

A$)$ future projections of sales, expenses, and other future economic events.

B$)$ product information and competitive positions.

C$)$ the general economy of the industry in which the company operates.

D$)$ economic events that affect a company that can be translated into accounting numbers.

Creditors assess credit risk by comparing a firm's required principal and interest payments to estimates of the firm's current and future:

A$)$ net assets.

B$)$ gross income.

C$)$ net income.

D$)$ cash flows.

Which of the following statements is not correct regarding a company's financial statements?

A$)$ They may present a picture of the company at a moment in time.

B$)$ They may describe changes that took place over a period of time.

C$)$ They reflect economic events that affect the company.

D$)$ They are comparable to the statements of other companies as all publicly held companies follow the very precise science of accounting.

Which is not correct regarding Regulation Fair Disclosure $($Reg FD$)?$

A$)$ It helps level the playing field between individual and institutional investors.

B$)$ It does not limit what management can say in private conversations with analysts or investors.

C$)$ It was passed by the SEC.

D$)$ It limits what management can say in private conversations with analysts and investors.

Relevant financial information:

A$)$ is free from bias and error.

B$)$ is measured in a similar manner among different companies.

C$)$ can be independently verified.

D$)$ is capable of making a difference in a decision.

To achieve faithful representation, the financial information must be:

A$)$ consistent, unbiased, and relevant.

B$)$ relevant, comparable, and timely.

C$)$ relevant, consistent, and timely.

D$)$ complete, neutral, and free from material error.

$2$