Asked by Amanda Loudermilk on May 05, 2024
Verified
A study by Speidell and Bavishi (1992) found that when accounting statements of foreign firms were restated on a common accounting basis,
A) the original and restated P/E ratios were quite similar.
B) the original and restated P/E ratios varied considerably.
C) most variation was explained by tax differences.
D) most firms were consistent in their treatment of goodwill.
Accounting Statements
Financial reports that provide a summary of a company’s financial condition, including income statement, balance sheet, and cash flow statement.
P/E Ratios
Price-to-Earnings Ratio, a measure of a company's current share price relative to its per-share earnings.
- Recognize the importance of restating financial statements to a common accounting basis for comparison.
Verified Answer
LH
Lawrencia HoustonMay 07, 2024
Final Answer :
B
Explanation :
The study found that when accounting statements of foreign firms were restated on a common accounting basis, the original and restated Price-to-Earnings (P/E) ratios varied considerably, indicating significant differences in accounting practices across countries.
Learning Objectives
- Recognize the importance of restating financial statements to a common accounting basis for comparison.
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