Which of the Following Statements About the Quality of Earnings

question 15

Multiple Choice

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

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

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Definitions:

Catharsis

The process of releasing and thereby providing relief from strong or repressed emotions.

Frustration Aggression Hypothesis

A psychological theory suggesting that aggression is often a result of frustration, which occurs when an individual's effort to achieve a goal is blocked.

Aggression

A range of behaviors that can result in both physical and psychological harm to oneself, others, or objects in the environment.

Catharsis

The act of liberating oneself from intense or suppressed feelings, thus achieving emotional relief.