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

---

Definitions:

Account Balances

The total amount of money in a financial account, determined by adding all credits and subtracting all debits.

Accrued Expenses

Expenses that have been incurred but not yet paid for, resulting in a liability recorded on the balance sheet.

Incurred

Incurred refers to costs or expenses that have been realized or taken on, often in the process of conducting business or other activities.

Stockholders' Equity

The amount of capital given to a company by its shareholders plus its retained earnings.