Which TWO of the following are possible effects of rising prices upon financial statements? Understatement of capital employed Overstatement of capital employed Overstatement of profits Understatement of profits

Q: Price-earnings ratio is computed by dividing annual dividends by average market value per share.…

A: Formula to compute Price -Earning ratio is: Price -Earning ratio =Market price per shareEarning per…

Q: An entity that wishes to present information about the effect of changing prices in a…

A: The term of hyperinflation is described as out of control, rapid and excessive rise in the price…

Q: 1.What value can the price-sales ratio provide to financial managers that the price-earnings ratio…

A: “Since you have asked multiple questions, we will solve the one question for you. If you want any…

Q: Differentiate between book value and market value. Explain why GAAPallows smoothing earnings…

A: The net value of a company's assets, as represented on its balance sheet, is roughly equal to the…

Q: In what way may the use of percentage depletion violatesound accounting theory?

A: Depletion: Depletion is defined as the reduction in the value of natural resources due to its…

Q: Which of the following financial ratios is not a measure of operating profitablitlity? Return on…

A: Formula: Return on Assets = Net income / Total Assets.

Q: s it true of false that stock sold for amounts in excess of par value results in a gain reported on…

A: A company issues its common stock at par value or at an amount more than the par value. The amount…

Q: r to pay un

A: Horizontal analysis :  Financial analysts use horizontal analysis, also known as trend analysis or…

Q: Why do changes in retained earnings occur?

A: Introduction: Retained earnings are nothing but the accumulated profits that the corporation keeps…

Q: Which of the following ratios is not used to analyzeprofitability?a. Net profit margin ratio.b.…

A: Financial ratio analysis: It can be defined as an analysis tool that is based upon the relative…

Q: in how the Du Pont system of analysis breaks down return on assets. Also explain how it breaks down…

A: Du Pont system is very important concept in calculation the return on equity and it is very…

Q: True or False Returns from the overall market can be thought of as a combination of three factors:…

A: The operating profit of a corporation is the entire earnings from its core business tasks for a…

Q: Why does "Retained Earnings" grow in value while the other two line items appear constant?

A: Retained earnings refers to the aggregate of net profits of business after accounting for the…

Q: The gain or loss on the net monetary position in a hyperinflationary economy shall be included in:…

A: This question is answered according to IAS 29 "Financial Reporting in Hyperinflationary Economies"

Q: Define each of the following terms: g. Repatriation of earnings; political risk

A: Repatriation means the conversion to a single domestic currency of any foreign currency.…

Q: explain mean reversion in earnings and how the accruals component of earnings aff ects thespeed of…

A: Earnings mean reversion means earnings of the company come to a normal level if the earnings for…

Q: Analyze the following statement with a suitable example:  “The current cost adjustment helps to…

A: Inflation seems to be the rate at which prices rise over a specific period of time. Inflation is…

Q: If the revenues are correctly reported and the gross profit of a company is understated, what is the…

A: There would be effect on the retained earnings on stockholders' equity if the gross profit is not…

Q: Wealth maximization does not take into account the timing of earnings, while Profit maximization…

A: Wealth maximization means maximization of market price of share whereas profit maximization is…

Q: Explain how earnings management from an informational perspective differs from the true income…

A: Earning management means to make the financial statements of the entity with the help of those…

Q: a. How does the return on total assets differ from the return on stockholders’ equity?b. Which ratio…

A: a. When return on total assets is considered, interest expense is added to the net income and…

Q: Explain how the Du Pont system of analysis breaks down return on assets. Also explain how it breaks…

A: A stakeholder is defined as a "person or group that has an interest in any decision or action of an…

Q: hich of the following would not be considered as a component of the "cost" of stock? a. Salaries of…

A: Inventoriable cost means the cost incurred to manufacture the product and included in inventory.…

Q: Profitability refers to Select one: O a. Earnings after interest and tax O b, Earnings before…

A: Income statement is the financial statement which shows the profitibility of the firm.

Q: Which of the following is NOT a Financial objective? a. Growth in earnings b. A bigger market share…

A: 1. Financial Objective - Financial Objectives are the objectives set by the organization.

Q: Why is earnings per share called “the bottom line”? What is EBIT, or operatingincome?

A: Earnings per share is the company’s net revenue/income that can be distributed among its…

Q: The most important factor to consider when determining the dividends to be declared is a. the…

A: When a company has more cash than it can use(Profit in hand and no further expansion plan to grow),…

Q: Define Diluted Earnings Per Share.

A: Earnings per share: An amount available as earnings for each of the common shares outstanding for a…

Q: 2. How do non-GAAP earnings relate to the concept of earnings quality?

A:

Q: Comment on the following statements with suitable example: i. The ratio return on assets has net…

A: Ratio analysis is a tool used by the financial analyst to measure the financial performance of the…

Q: Why does an increase in the ratio of current assets to total assets decrease both profits and risk…

A: Current assets and current liabilities are utilized to decide the liquidity of an organization. At…

Q: Which of the following would not be used as a summary performance measure when using market…

A: In financial analysis the valuation of stock is done in term of multiples.

Q: FIFO and weighted average.  But what if a company wants to use LIFO to report its inventory because…

A: Introduction Dollar value of LIFO is an accounting method for valuation of inventory, this method…

Q: Which of the following best describes why the predicted incremental earnings arising from a given…

A: Solution:- Incremental earning that we get from a project are not enough to find out that the…

Q: How does the inventory accounting choice (LIFO/FIFO) impact a firm's valuation? a)Deferring tax…

A: LIFO - Last in First Out method of inventory valuation is based on the concept that the newest…

Q: The building blocks of financial statement analysis does not include:   a. Market expectations.…

A: Financial statements are those statements which are prepared at the end of the period in order to…

Q: Ratios:  Which of the following ratios is not considered to be a test of profitability?   Long-Term…

A: Profitability ratios are a group of financial indicators that are used to evaluate a company's…

Q: Is the market price per share Net income Less Preferred Dividends

A: Yes. Market Price per share is already given in the question and NET INCOME- Preferred Dividends is…

Q: a) Define financial leverage. b) What is the effect on earnings? c) When is the use of financial…

A: a) When the company using the debt capital in order to increases the assets and conducting the…

Q: explain Small-firm Effect , Price/Earnings Effect, and January Effect These anomalies have…

A: CAPM-It  explains the relationship between the expected return, non-diversifiable risk and the…

Q: Does the income statement 'tie in' to the balance sheet? If so does it increase or decrease retained…

A: Income statement is also known as profit and loss account, which is one of the company financial…

Q: When making judgements lower profits and asset values are estimated rather than higher values. Which…

A: The underlying principles, assumptions, and circumstances that establish the parameters and…

Q: What are the impotance of Earning per Share and Diluted Earnings per Share in making economic…

A: Diluted EPS= Net Income−Preferred DividendsWASO+CDS​ where: EPS=Earnings per share WASO=Weighted…