Chapter 2

What is GAAP and who oversees​ it? ​(Select all the choices that​ apply.) A. GAAP stands for Generally Accepted Accounting Principles. B. GAAP stands for Generally Accepted Accounting Policies. C. GAAP was established by the Financial Accounting Standards Board​ (FASB) and is the format required by the SEC when companies submit their quarterly and annual reports. D. GAAP regulations are enforced by the Internal Revenue Service.

A & C

What checks are there on the accuracy of these​ statements? ​(Select all the choices that​ apply.) A. Public companies must use a common set of rules and standard format when they prepare their reports. B. Corporations are required to hire a neutral​ party, known as an​ auditor, to check the annual financial​ statements, ensure that the statements are prepared according to GAAP and provide evidence to support the reliability of the information. C. In addition to the​ auditor's role in reviewing the financial​ statements, the​ Sarbanes-Oxley Act requires both the CEO and the CFO to personally attest to the accuracy of the financial statements presented to shareholders and to sign a statement to that effect. D. When an auditor is not​ available, a​ corporation's CFO or the CEO can certify that financial statements are prepared according to GAAP.

A, B & C

Does this imply that the market price of​ Global's shares increased in 2019​? Explain. ​(Select all the choices that​ apply.) A. The market value of a stock does not depend on the historical cost of the​ firm's assets, but on​ investors' expectation of the​ firm's future performance. B. An increase in book value necessarily indicates an increase in​ Global's share price. The book value of the equity does not go up unless the share price goes up. C. An increase in book value does not necessarily indicate an increase in​ Global's share price. D. There are many events that may affect​ Global's future​ profitability, and hence its share​ price, that do not show up on the balance sheet.

A, C, & D

What four financial statements can be found in a​ firm's 10-K​ filing? What checks are there on the accuracy of these​ statements? Every public company is required to produce quarterly and annual financial statements. Those statements​ are: ​(Select all the choices that​ apply.) A. The statement of financial position. B. The income statement. C. The statement of cash flows. D. The statement of​ stockholders' equity. E. The statement of​ stockholders' liabilities.

A,B,C & D