Let's break down each statement to see which ones support the theory that accounting profits may not be the best measure of a company's performance.

(1) Profits are affected by accounting policies: This statement supports the theory because it suggests that the way profits are calculated can vary based on the accounting policies a company uses. This means that the profit number might not reflect the actual economic performance of the company.

(2) Profits take no account of risk: This statement also supports the theory. A company might be making a lot of profit, but if it's taking big risks to do so, those profits might not be sustainable in the long run. So, just looking at profits doesn't give you the full picture of a company's performance.

(3) Profits take no account of the level of investment made during the year: This statement supports the theory as well. A company might be making profits, but if it's not investing in its future (like buying new equipment or researching new products), it might not do well in the future. So again, just looking at profits doesn't give you the full picture.

(4) Profits are measures of short-term historic performance: This statement supports the theory because it suggests that profits only tell you about a company's past performance, not how it will perform in the future.

So, all four statements (1, 2, 3, and 4) support the theory that accounting profits may not be the best measure of a company's performance.

Question

Let's break down each statement to see which ones support the theory that accounting profits may not be the best measure of a company's performance.

(1) Profits are affected by accounting policies: This statement supports the theory because it suggests that the way profits are calculated can vary based on the accounting policies a company uses. This means that the profit number might not reflect the actual economic performance of the company.

(2) Profits take no account of risk: This statement also supports the theory. A company might be making a lot of profit, but if it's taking big risks to do so, those profits might not be sustainable in the long run. So, just looking at profits doesn't give you the full picture of a company's performance.

(3) Profits take no account of the level of investment made during the year: This statement supports the theory as well. A company might be making profits, but if it's not investing in its future (like buying new equipment or researching new products), it might not do well in the future. So again, just looking at profits doesn't give you the full picture.

(4) Profits are measures of short-term historic performance: This statement supports the theory because it suggests that profits only tell you about a company's past performance, not how it will perform in the future.

So, all four statements (1, 2, 3, and 4) support the theory that accounting profits may not be the best measure of a company's performance.

Knowee AI · Accepted Answer

Let's break down each statement to see which ones support the theory that accounting profits may not be the best measure of a company's performance.

(1) Profits are affected by accounting policies: This statement supports the theory because it suggests that the way profits are calculated can vary based on the accounting policies a company uses. This means that the profit number might not reflect the actual economic performance of the company.

(2) Profits take no account of risk: This statement also supports the theory. A company might be making a lot of profit, but if it's taking big risks to do so, those profits might not be sustainable in the long run. So, just looking at profits doesn't give you the full picture of a company's performance.

(3) Profits take no account of the level of investment made during the year: This statement supports the theory as well. A company might be making profits, but if it's not investing in its future (like buying new equipment or researching new products), it might not do well in the future. So again, just looking at profits doesn't give you the full picture.

(4) Profits are measures of short-term historic performance: This statement supports the theory because it suggests that profits only tell you about a company's past performance, not how it will perform in the future.

So, all four statements (1, 2, 3, and 4) support the theory that accounting profits may not be the best measure of a company's performance.

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