A Quality of Earnings Ratio Higher Than One Is an Indicator

question 5

Multiple Choice

A quality of earnings ratio higher than one is an indicator of which of the following?

• A) A company's high debt position.
• B) That fixed assets are the company's most important resources.
• C) That a company has cash generated by operations higher than the amount of profit.
• D) That a company has too many fixed assets.

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Definitions:

Credit Terms

The conditions under which a seller will extend credit to a buyer, including the repayment time frame and any interest charged.

Merchandise

Goods bought and sold in the normal course of business, typically referring to products available for resale to customers.

Damaged

Refers to goods or items that are impaired, reduced in value, or made less useful due to wear, tear, or harm.

Sales Revenue

The total amount of income generated from the sale of goods or services related to a company's primary operations.