Mark-to-market accounting, a bookkeeping technique by which estimated future revenue is counted as money in hand, can be used to make a company appear more profitable. This is especially true for large corporations in the utility and energy sectors, where multi-million dollar contracts are often signed for services that will not be delivered for several years. Corporate executives are then able to quote large annual revenue figures to stockholders, even when actual cash flow is almost nonexistent.

Based on the information above, which of the following could most properly be concluded about companies that use mark-to-market accounting?

Executives routinely exaggerate the net worth of these companies by millions of dollars a year.--- This cannot be inferred from the above information as nowhere is the frequency of using this technique mentioned.

Mark-to-market accounting, though dangerous, is a necessity in corporations which contract for services that will not be delivered until a later date. The need for this technique is not within the scope of this argument.

Executives of these companies are all dishonest and seek to deceive shareholders. Out of context

Information in addition to quoted annual revenue figures is needed in order to tell how profitable a company really is. This is true because to assess profitability, we need to have other information in addition to annual revenue figures.

These companies will eventually collapse when the difference between reported annual revenue and cash flow has grown too great. Again, out of context.

Choice is between B and D. Others can easily be eliminated. Hope D is correct!

OA is D

Birottam Dutta wrote:Mark-to-market accounting, a bookkeeping technique by which estimated future revenue is counted as money in hand, can be used to make a company appear more profitable. This is especially true for large corporations in the utility and energy sectors, where multi-million dollar contracts are often signed for services that will not be delivered for several years. Corporate executives are then able to quote large annual revenue figures to stockholders, even when actual cash flow is almost nonexistent.

Based on the information above, which of the following could most properly be concluded about companies that use mark-to-market accounting?

Executives routinely exaggerate the net worth of these companies by millions of dollars a year.--- This cannot be inferred from the above information as nowhere is the frequency of using this technique mentioned.

Mark-to-market accounting, though dangerous, is a necessity in corporations which contract for services that will not be delivered until a later date. The need for this technique is not within the scope of this argument.

Executives of these companies are all dishonest and seek to deceive shareholders. Out of context

Information in addition to quoted annual revenue figures is needed in order to tell how profitable a company really is. This is true because to assess profitability, we need to have other information in addition to annual revenue figures.

These companies will eventually collapse when the difference between reported annual revenue and cash flow has grown too great. Again, out of context.

Choice is between B and D. Others can easily be eliminated. Hope D is correct!

the heading given for this question is must be true....(when we see the list of different cr's)
but in the question conclusion is asked..!!
is it mst be true and conclusion needs same answer?

Changed the heading

jimmyjimmy wrote:the heading given for this question is must be true....(when we see the list of different cr's)
but in the question conclusion is asked..!!
is it mst be true and conclusion needs same answer?

Mark-to-market accounting, a bookkeeping technique by which estimated future revenue is counted as money in hand, can be used to make a company appear more profitable. This is especially true for large corporations in the utility and energy sectors, where multi-million dollar contracts are often signed for services that will not be delivered for several years. Corporate executives are then able to quote large annual revenue figures to stockholders, even when actual cash flow is almost nonexistent.

Based on the information above, which of the following could most properly be concluded about companies that use mark-to-market accounting?

Executives routinely exaggerate the net worth of these companies by millions of dollars a year.---
This is not mentioned anywhere in the given statements. Also, it concludes wrongly and not relevant to the discussion


Mark-to-market accounting, though dangerous, is a necessity in corporations which contract for services that will not be delivered until a later date.

It is wrong conclusion.

Executives of these companies are all dishonest and seek to deceive shareholders.
This has no proof anywhere.


Information in addition to quoted annual revenue figures is needed in order to tell how profitable a company really is.

This is correct and it can conclude well the discussion in the passage.


These companies will eventually collapse when the difference between reported annual revenue and cash flow has grown too great.
Prediction has not basis to anything given in para