When assessing earnings persistence it is important to analyze discretionary exp

Question

When assessing earnings persistence it is important to analyze discretionary expenditures. Which of the following statements are correct?

I. Research and Development is generally considered a discretionary expenditure
II. Decreased discretionary expenditures should always be taken as a positive indicator that the company is getting costs under control
III. Advertising expenditures can be considered discretionary expenditures, which often have implications for future sales
IV. Absolute levels of discretionary expenditures are more important than the level of expenditures relative to sales
A. I, II and III
B. I, III and IV
C. II, III and IV
D. I and III

Explanation / Answer

D. I and III

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