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
