Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

1. Introduction to Accounting

Types of Accounting

Financial Accounting

1. Introduction to Accounting

Types of Accounting

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Multiple Choice

Which of the following statements is most correct concerning diversification and risk in the context of accounting and financial reporting?

Diversification reduces unsystematic risk by spreading investments across different assets.

Diversification has no impact on the risk associated with an investment portfolio.

Diversification increases the overall risk of an investment portfolio.

Diversification eliminates all types of risk, including systematic risk.

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Verified step by step guidance

Understand the concept of diversification: Diversification involves spreading investments across various assets or industries to reduce the impact of any single asset's poor performance on the overall portfolio.

Differentiate between types of risk: Unsystematic risk (also known as specific or idiosyncratic risk) is unique to a particular company or industry and can be mitigated through diversification. Systematic risk, on the other hand, is market-wide and cannot be eliminated through diversification.

Analyze the statement 'Diversification reduces unsystematic risk by spreading investments across different assets': This is correct because diversification minimizes the impact of individual asset volatility, reducing unsystematic risk.

Evaluate the statement 'Diversification has no impact on the risk associated with an investment portfolio': This is incorrect because diversification directly reduces unsystematic risk, thereby lowering the overall risk of the portfolio.

Assess the statement 'Diversification eliminates all types of risk, including systematic risk': This is incorrect because systematic risk, such as market-wide economic changes, cannot be eliminated through diversification.