The main difference between accounting measures of firm performance and stock-market measures of firm performance is:
A)Accounting measures are less reliable because of firms' discretion over how they apply accounting conventions
B)Stock market measures are less reliable because share prices are so volatile
C)Accounting data offers a sound basis for forecasting future performance
D)Accounting measures are backward looking;stock market measures are forward looking

Question

Quizplus · Accepted Answer

Accounting measures are based on past financial statements and reflect what has already happened in the firm. Stock market measures, on the other hand, are forward-looking and reflect investors' expectations of the firm's future performance.

The Main Difference Between Accounting Measures of Firm Performance and Stock-Market