The financial statements of a firm that uses more conservative accounting practices would be likely to report:
A)Higher profitability.
B)Higher dividends.
C)Higher liabilities.

Question

Quizplus · Accepted Answer

Firms that use more conservative accounting practices tend to report higher liabilities, as they are more likely to recognize expenses and losses sooner rather than later, thereby increasing the amount of liabilities reported on the balance sheet. This can result in lower reported profitability, as higher expenses and losses will reduce net income. However, this does not necessarily have an impact on dividends, as dividend payments are typically based on the firm's level of earnings or cash flow rather than its accounting practices.

The Financial Statements of a Firm That Uses More Conservative