Which of the following is the most likely example of bias in a firm's accounting profitability measures?
A)A manufacturing firm increases its cash holdings.
B)A pharmaceutical firm increases its holdings of finished goods inventory.
C)A bank increases its holding of marketable securities.
D)A consulting firm launches a new policy to pay for MBA education for its midlevel managers.

Question

Quizplus · Accepted Answer

The consulting firm launching a new policy to pay for MBA education for its midlevel managers (D) is the most likely example of bias in accounting profitability measures. This is because the expense of education could be capitalized and amortized over several years, rather than being expensed immediately. This accounting treatment could artificially inflate the firm's short-term profitability by deferring the expense recognition.

Which of the Following Is the Most Likely Example of Bias