Which of the Following Ratios Is Least Likely to Assist

question 26

Multiple Choice

Which of the following ratios is least likely to assist the auditor in determining whether the client is experiencing financial difficulties?

• A) Net worth/total liabilities.
• B) Cash/total assets.
• C) Total liabilities/total assets.
• D) Net income before taxes/net sales.

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Definitions:

Affiliated Group

A collection of related companies that function as a single economic entity through shared ownership and control.

Subsidiary Inclusion

The process of integrating a subsidiary company's financials into the parent company's financial statements.

Consolidated Income Tax Return

A singular income tax return filed by an affiliated group of corporations that combines their tax liabilities into one return, possibly resulting in tax benefits.