Profit is:
A) an ideal measure of the 'well-offness' of a firm because income and expenses are clearly defined.
B) only a measure of financial performance and therefore not useful in decision-making.
C) directly affected by the accounting policy choices implemented by management.
D) comparable across all firms as it is simply calculated by subtracting expense from revenues.

Question

Quizplus · Accepted Answer

Profit can be affected by the accounting policy choices implemented by management, making it an unreliable indicator of a firm's financial position. This is because management can make choices that affect the timing and amount of revenues and expenses recognized in the financial statements, which can then impact the reported profit. Therefore, while profit is a common measure of financial performance, it is not necessarily a reliable basis for decision-making.

Profit Is