BUSINESS INT-601-summarizes the results of the basic operating
12- ________ summarizes the results of the basic operating activities of a company.A.Operating income B.Net profit C.Gross margin D.Gross profit13-“It is better to recognize goodwill than to write up assets to their fair-market values.” Do you agree? Why?A. Yes. It is always better to recognize goodwill than to write up assets to theirfair-market values because recording goodwill rather than increasing the values of individual assets will increase future depreciation. B. No. Rules require that assets in a consolidated statement reflect thefair-market value at the time of the acquisition. Companies may favor recording differences between book values and the price paid for an acquisition as goodwill but this is only acceptable if the parent company owns less than50% of the subsidiary. C. No. Rules require that assets in a consolidated statement be recorded at the lower of book or market value at the time of the acquisition. This is only if the parent company owns less than20% of the subsidiary. D. No. Rules require that assets in a consolidated statement reflect thefair-market value at the time of the acquisition. Companies may favor recording differences between book values and the price paid for an acquisition as goodwill because recording goodwill rather than increasing the values of individual assets avoids the added depreciation charges incurred on the individual assets.14- The section of the annual report that explains major changes in the income statement, changes in liquidity and capital resources and the impact of inflation is called the ________.A. appendix to the financial statements B. internal control report C. management’s discussion and analysis D. notes to the financial statements15- In an efficient capital market, the appropriate investment strategy is risk control, ________ and ________.A. lowdiversification; high turnover of securities B. highdiversification; low turnover of securitiesC. lowdiversification; low turnover of securities D. highdiversification; high turnover of securities
