Which of the Following Statements About the Quality of Income

question 9

Multiple Choice

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

• A)An increase in operating assets and a decrease in liabilities will reduce operating cash flows, thereby reducing the ratio.
• B)Seasonal variations in sales and purchases of inventory can cause wide deviations in the quality of income ratio.
• C)When sales are growing, receivables and inventory normally increase at a faster rate than accounts payable often causing operating cash flows to be less than income.
• D)Aggressive revenue recognition tends to increase the ratio.

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Definitions:

Regression Line

A straight line used in linear regression analysis that best fits a set of data points, showing the relationship between two variables.

Confidence Interval

A span of numbers, obtained from sample observations, which is expected to include the value of an unobserved population attribute at a certain confidence level.

Standard Error

A statistic that measures the dispersion of sample means around the population mean, often used to estimate the precision of sample statistics.

Regression Line

A straight line that best fits the data in a linear regression analysis, representing the relationship between the independent and dependent variables.