Which of the Following, When Discovered Through the Use of Analytical

question 31

Multiple Choice

Which of the following, when discovered through the use of analytical procedures, would indicate a relatively high risk of financial failure?

• A) an increase in the balance in fixed assets
• B) a decline in gross margin percentages
• C) an increase in the ratio of allowance for uncollectible accounts to gross accounts receivable, while at the same time accounts receivable turnover decreases
• D) a higher than normal ratio of long-term debt to net worth, as well as a lower than average ratio of profits to total assets

---

Definitions:

Subsidiary

A company controlled by another company, often referred to as the parent company.

Dividend

A payment made by a corporation to its shareholders, usually as a distribution of profits.

Non-controlling Interest

A stake in a company that is less than 50%, implying that the holder does not have control over the company's operations.

Equity

The value of an ownership interest in a company, calculated as company assets minus its liabilities and representing the net assets owned by shareholders.