Question #53
Reading: Reading 12 Evaluating Quality of Financial Reports
PDF File: Reading 12 Evaluating Quality of Financial Reports.pdf
Page: 48
Status: Correct
Correct Answer: A
Question
To assess the quality of financial reports, which question is least necessary for an analyst to answer?
Answer Choices:
A. Are the financial reports decision useful and GAAP compliant?
B. Are reported earnings consistent with the firm’s budget?
C. Do earnings represent an adequate level of return?
Explanation
Quality of financial reports is assessed by answering two questions: Whether the financial
reports are decision useful and GAAP compliant and whether the results quality is high
(i.e., earnings provide adequate return on capital and are sustainable).