Total equity may be more reliable of a benchmark for determining planning materiality when a company is experiencing a _______.
A)loss or very poor operating results
B)high number of operating lease contracts
C)large amount of property, plant, and equipment purchases
D)significant volume of sales.

Question

Quizplus · Accepted Answer

Total equity represents the residual value available to shareholders after all liabilities are paid. In a situation where a company is experiencing a loss or very poor operating results, total equity becomes a more significant metric as it directly impacts the value available to shareholders. Therefore, total equity may be a more reliable benchmark for determining planning materiality in such situations.

Total Equity May Be More Reliable of a Benchmark for Determining