Financial Statement Informativeness Quiz
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Questions and Answers

Which statement accurately describes the relationship between main diagonal probabilities and the investor's ability to predict future firm performance?

  • There is no relationship between main diagonal probabilities and the investor's ability to predict future firm performance
  • The higher the main diagonal probabilities, the better the investor can predict future firm performance (correct)
  • The main diagonal probabilities have no impact on the investor's ability to predict future firm performance
  • The higher the main diagonal probabilities, the worse the investor can predict future firm performance

    • What do the main diagonal probabilities capture?

  • Future firm performance
  • Financial statement informativeness (correct)
  • Investor predictions
  • Investment opportunities

    • What are highly informative financial statements also called?

  • Precise
  • Transparent (correct)
  • High quality
  • Inaccurate

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