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Which statements is not correct for economic income

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Problem 1: Which of the following statements is NOT correct for economic income?

a. Economic income measures change in shareholder's wealth.

b. Economic income includes both recurring and nonrecurring components.

c. Economic income is determined as cash flow during the period plus the change in the present value of expected future cash flows to shareholders.

D. Economic income is the stable average income that a business is expected to earn over its life, given the current state of its business conditions.

E. None of above

Problem 2: Which one of the following is NOT an example of a red flag to one should be aware of when evaluating earnings quality?

A. Qualified audit report

B. Net income this year is higher than net income from last year

C. Reported earnings consistently higher than operating cash flows D. Frequent or unexplained changes in accounting policies

E. Sudden increase in inventories in comparison to sales

Reference no: EM132928089

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