Most analysts believe which of the following is true about EPS? A. Consistent improvement in EPS year after year is the indication of continuous improvement in the company’s earning power. B. Consistent improvement in EPS year after year is the indication of continuous decline in the company’s earning power. C. Consistent improvement in EPS year after year is the indication of fraud within the company. D. Consistent improvement in EPS year after year is the indication that the company will never suffer a year of net loss rather than net income.
Most analysts believe which of the following is true about EPS? A. Consistent improvement in EPS year after year is the indication of continuous improvement in the company’s earning power. B. Consistent improvement in EPS year after year is the indication of continuous decline in the company’s earning power. C. Consistent improvement in EPS year after year is the indication of fraud within the company. D. Consistent improvement in EPS year after year is the indication that the company will never suffer a year of net loss rather than net income.
Which of the following is an example of “cookie jar” accounting?
a) A company creates cash reserves in profitable years so the money can be used to offset poor earnings in bad years to give the impression that the company is consistently achieving earnings goals and meeting investor expectations.
b)A company intentionally misapplies GAAP and, if caught, argues that the earnings effect is “immaterial” and the error is not worth correcting.
c)A company takes a one-time charge against income in order to reduce assets, which results in lower expenses in the future.
d) A company recognizes revenues before it is appropriate to do so.
Which of the following is not a reason a company would be willing to accept new business at a loss?
A.)
The company has the expectation that certain customers can influence other potential customers.
B.)
The company has the expectation that it will make up for it in later years and has the expectation that certain customers can influence other potential customers.
C.)
The company has the expectation that its estimates will prove incorrect and that the business will result in a profit.
D.)
The company has the expectation that it will make up for it in later years.
JKW Corporation (a fictional company) has been selling plumbing supplies since 1981. In 2003, the company
adopted the LIFO method of valuing its inventory. The company has grown steadily over the years and a layer has
been added to its LIFO inventory in each of the years the method has been used. The company's inventory turnover
ratio has averaged 4.5 in recent years. Management attempts to maintain a stable level of inventory at each store;
the growth in inventory has been due to new stores being opened each year. In 20X1, the board of directors
approved an incentive program that pays managers a sizable bonus in each year that certain performance targets
are met. For 20X2, targeted earnings per share are $3.35. In an effort to track progress toward meeting this target,
management produced the following income statement for the first nine months of 20X2.
JKW Corporation
Income Statement
January 1-September 30, 20X2
Sales
$13,284,000
Cost of goods sold
Gross margin
Operating expenses…
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