Test Bank For Financial Reporting And Analysis 7th Ed By Revsine
Chap001 The Economic and Institutional Setting for Financial Reporting
True/False
[QUESTION]
1. The role of financial accounting information is to facilitate economic transactions and to foster efficient allocation of resources among businesses and individuals.
Answer: True
Learning Objective: 01-01
Difficulty: 1 Easy
AACSB: Reflective Thinking
AICPA: BB Resource Management
Blooms: Remember
Topic: Financial statements―As sources of information
[QUESTION]
2. Financial reports provide information that can reduce investors’ uncertainty about the company’s opportunities and risks, thereby raising the company’s cost of capital.
Answer: False
Learning Objective: 01-02
Difficulty: 2 Medium
AACSB: Reflective Thinking
AICPA: BB Resource Management
AICPA: FN Risk Analysis
Blooms: Understand
Topic: Financial statements―For decision-maker needs
[QUESTION]
3. Comparability across companies allows analysts to identify real economic similarities in and differences between underlying economic events because those similarities or differences are not obscured by accounting methods or disclosure practices.
Answer: True
Learning Objective: 01-04
Difficulty: 2 Medium
AACSB: Reflective Thinking
AICPA: FN Risk Analysis
AICPA: FN Measurement
Blooms: Remember
Topic: Fundamental concepts of financial reporting
[QUESTION]
4. Executive compensation contracts seldom contain annual bonus and longer term pay components tied to financial statement results, but instead usually rely on stock options as a means to reward managers in a manner that is less subject to manipulation by management.
Answer: False
Learning Objective: 01-02
Difficulty: 2 Medium
AACSB: Reflective Thinking
AICPA: BB Resource Management
AICPA: BB Critical Thinking
AICPA: FN Risk Analysis
Blooms: Understand
Topic: Financial statements―For decision-maker needs
[QUESTION]