Research indicates that all of the following statements are correct, except:
A) Stock price movements are more closely related to income statement information than cash flow information.
B) Useful (but not perfect) models exist that use financial statement data to predict company bankruptcy.
C) Useful (but not perfect) models exist that use financial statement data to detect improper reporting of financial information.
D) Stock price movements are greater when a change in income is due to one-time items than when the change in income is due to persistent items.

Question

Quizplus · Accepted Answer

Stock price movements are typically more significant when a change in income is due to persistent items rather than one-time items. This is because persistent items are expected to recur in the future, affecting the company's long-term profitability, whereas one-time items are viewed as not indicative of future performance.

Research Indicates That All of the Following Statements Are Correct