Test Bank For Financial Reporting And Analysis 7th Ed By Revsine

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 bonuses 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]