Answered: which: successful strategies will…

which: successful strategies will not be reflected in accounting profits for a number of periods. the price/earnings ratio is commonly greater than 12. profits may be the

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter6: Accounting Quality

Section: Chapter Questions

Problem 2QE

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Question

Market-based bonus schemes may be considered more appropriate from a PAT perspective in industries in which:

		successful strategies will not be reflected in accounting profits for a number of periods.
		the price/earnings ratio is commonly greater than 12.
		profits may be the subject of manipulation by managers.
		capital investment is not an important strategic decision.

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