Question #16
Reading: Reading 12 Evaluating Quality of Financial Reports
PDF File: Reading 12 Evaluating Quality of Financial Reports.pdf
Page: 11
Status: Correct
Correct Answer: A
Question
Complete the following sentence. An analyst would apply _________ to the cash component of income compared to the accrual component when evaluating company performance.
Answer Choices:
A. a higher weighting
B. the same weighting
C. a lower weighting
Explanation
Since the cash component has more sustainability in the future than the accrual
component, an analyst would apply a higher weighting to the cash component of income
than the accrual component when evaluating company performance.