Which of the Following Statements About the Quality of Earnings

question 35

Multiple Choice

Which of the following statements about the quality of earnings ratio is true?

• A) Failure to accrue appropriate expenses will inflate net earnings and increase the quality of earnings ratio.
• B) When sales are growing, receivables and inventory normally increase faster than trade payables so the ratio increases.
• C) Failure to accrue appropriate expenses will inflate net earnings and reduce the quality of earnings ratio.
• D) Seasonal variations in sales have no impact on the quality of earnings ratio.

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Definitions:

Retailer-Sponsored Cooperative

A group of retailers that pool their resources to gain efficiencies and leverage in purchasing or marketing.

Target Market Coverage

The extent to which a company aims to reach its potential market through its marketing efforts and distribution channels.

Distribution Density

The measure of how widely and closely a product or service is distributed and available to consumers within a market.

Geographical Area

A specific physical region or space defined by natural or artificial boundaries.