Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN: 9781285190907
Author: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher: Cengage Learning
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Chapter 6, Problem 2QE
90907-6-2QE
To determine
Explain the way the
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Students have asked these similar questions
Th e information provided by a low-quality fi nancial report will most likely :A . decrease company value.B . indicate earnings are not sustainable.C . impede the assessment of earnings quality.
Which of the following best describes the potential impact of business risk on Earnings Quality?
Select one:
a. Business risk is mostly composed of financial risk factors and it has minimal effect on earnings quality.
b. Higher earnings quality is linked with companies more insulated from business risk. While business risk is not primarily a result of management’s discretionary actions, this risk can be lowered by skillful management strategies.'
c. A higher level of earnings quality can be observed in the industries with high business risk, because higher risk means higher returns
d. For managing business risk, the managers almost have no discretion, therefore business risk is not directly or indirectly related to earnings quality.
Which of the following is true about designing an accounting−based performance measure?
A. Management's beliefs are not required during the analyses.
B. The issues considered in each step are independent.
C. The decisions made in steps are followed in a hierarchical order.
D. Behavioral criteria are important when evaluating the steps
Chapter 6 Solutions
Financial Reporting, Financial Statement Analysis and Valuation
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Similar questions
- Is there a way to prevent managers from focusing on accounting measures as performance measures?arrow_forwardThe following statements are true regarding the financial perspective EXCEPT:a. Financial performance can be improved through two basic approaches – revenuegrowth and productivity.b. Financial objectives typically relate to productivity.c. A financial measure might be net income.d. A financial objective might be to offer low process to satisfy and retain price-sensitivecustomers.arrow_forwardWhich of the following statements is false? Multiple Choice In general, the term expense is used for managerial purposes, while the term cost refers to external financial reports. An opportunity cost is the benefit forgone by selecting one alternative over another. An outlay cost is a past, present, or future cash outflow. A cost is a sacrifice of resources.arrow_forward
- A profit center manager often also supervises revenue and cost center managers. True or False True False Investment center managers have control over the investment of assets. True or False True False The balanced scorecard attempts to focus managers' attention on more than just financial measures. True or False True Falsearrow_forwardHistorically, performance measurement systems have been based on accounting or other quantitative numbers. One issue is that some accounting numbers can be affected by the actions of managers, and this may result in distorted performance results. A well-designed performance measurement system should eliminate these potential conflicts, as much as possible. There is a way to prevent these issues associated with using accounting measures as performance measures through use of nonaccounting measures in conjunction with accounting-based measures to help mitigate the problems of using accounting-based measures alone. Most performance measurement systems today use a combination of accounting-based measures and non-accounting-based measures, short-term or long-term indicators, or quantitative and qualitative components. True / Falsearrow_forwardWhich of the following statements regarding the balanced scorecard is not correct? a. It seeks to address the problems associated with traditional financial measures used to assess performance. b. The notion of value chain analysis plays a major role in the drawing up of a balanced scorecard. c. It relies on the perception of the users with regard to service provided. d. It is directly derived from scientific management theories.arrow_forward
- What type of qualitative issues should management consider if a quantitative analysis reveals that a segment should be dropped?arrow_forwardIf there are deviations from the stated goals and objectives, what steps can managers take to get back on track? Provide at least two specific examples.arrow_forwardThe chapter encourages analysts to develop forecasts that are realistic, objective, and unbiased. Some firms managers tend to be optimistic. Some accounting principles tend to be conservative. Describe the different risks and incentives that managers, accountants, and analysts face. Explain how these different risks and incentives lead managers, accountants, and analysts to different biases when predicting uncertain outcomes.arrow_forward
- Which of the following is not a managerial planning or control report? Effectiveness of advertising and promotionAnalysis of bad debt and credit policies Sales analysis and profitability analysisInventory availabilityarrow_forwardProfitability, customer satisfaction, or employee satisfaction are examples of: a. Association b. Data Exploration c. Cause-and-effect d. None of the abovearrow_forwardWhich of the following statements about the balanced scorecard approach is false? It requires managers to focus on financial measures more than nonfinancial measures. It looks at performance from the following perspectives: financial, customer, internal business, and learning and growth. It helps balance short-term operating performance with long-term strategies. It recognizes that traditional measures of performance are often not adequate to fully assess a company’s performance.arrow_forward
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