Which of the Following Statements About the Quality of Income

question 61

Multiple Choice

Which of the following statements about the quality of income ratio is correct?

• A)When sales are growing,receivables and inventory normally increase faster than accounts payable so the ratio increases.
• B)Seasonal variations in sales have no impact on the quality of income ratio.
• C)Failure to accrue appropriate expenses will inflate net income and reduce the quality of income ratio.
• D)The quality of income ratio is computed by dividing net income by cash flow from operating activities.

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Definitions:

Subsidized

Referring to goods, services, or activities that receive financial support from the government or another organization to reduce costs and encourage consumption or production.

Command Economies

Economic systems where the government or central authority makes all decisions regarding the production and distribution of goods and services.

Corporation

A legal entity that is separate and distinct from its owners, which can own assets, incur liabilities, and sell securities, among other activities.

Independent Legal Entity

An organization that has legal rights and obligations independent of its members, such as the ability to enter contracts, sue, and be sued.