textbook: Financial Accounting Theory 8E - William Scott *I need at least 5 sentence explanations for each question.thanks* X Ltd. is a growth firm that uses very conservative accounting policies. Y Ltd. Is growing more slowly and uses fair value accounting for its capital assets and related amortization. Otherwise, X Ltd. and Y Ltd. are quite similar. They are the same size and have similar capital structures and betas. Required: 2 a) Both X and Y report the same GN in earnings this year. Which firm would you expect to have the greater security market response (earnings response co-efficient) to this good earnings news? Explain. 4 b) Suppose that X Ltd. had a much higher debt-to-equity ratio and beta than Y did. Would your answer to part a) change? Explain the effect each of these two factors has on the security market response. 4 c) Use the concept of signalling to explain why X and Y Ltd. might choose different accounting policies.