Which three of the following are major flaws in earnings- based management?
A) It ignores the riskiness of earnings.
B) It assumes that shareholder value can only be determined in terms of earnings.
C) It ignores the time value of money.
D) Profit figures are subjective, and thus open to manipulation and distortion.

Question

Quizplus · Accepted Answer

A) Earnings-based management often overlooks the risk associated with generating earnings, focusing solely on the numbers rather than the quality or sustainability of those earnings. C) This approach also disregards the time value of money, failing to account for how the value of earnings can change over time. D) Profit figures can be subjective and manipulated through various accounting practices, making them unreliable for assessing a company's true financial health.

Which Three of the Following Are Major Flaws in Earnings-