The bottom-line earnings figure from the accounting system is misleading because _____.
A) it does not reflect actual cash inflows and outflows of the firm
B) stock dividends are difficult to forecast
C) depreciation is a cash outlay but is not reflected as such
D) tax laws change regularly which cause the firm to misjudge its true tax obligation

Question

Quizplus · Accepted Answer

The bottom-line earnings figure from the accounting system is based on accrual accounting, which includes non-cash items such as depreciation and does not necessarily reflect actual cash inflows and outflows of the firm.

The Bottom-Line Earnings Figure from the Accounting System Is Misleading