Which of the Following Is a "Red Flag" Suggesting That

question 92

Multiple Choice

Which of the following is a "red flag" suggesting that a company may be in trouble?

• A) Inconsistent movements among sales, inventory, and receivables
• B) A reduction in the debt ratio
• C) A decrease in inventory levels
• D) Cash flow from operations is higher than net income

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Definitions:

Costs

The value of financial resources consumed in the production of goods or services, including material, labor, and overhead expenses.

Net Income

This is the total profit of a company after all expenses, including taxes and interest, have been deducted from total revenue.

Interest Expense

The cost incurred by an entity for borrowed funds, typically expressed as an annual percentage rate on loans or bonds.

Depreciation

The accounting process of allocating the cost of tangible assets over their useful lives, reflecting wear and tear, deterioration, or obsolescence.