Analysts Look for Red Flags in Financial Statements That May

question 44

Multiple Choice

Analysts look for red flags in financial statements that may signal financial trouble.Which of the following is a red flag that suggests that a company may be in trouble?

• A) a decline in days' sales in inventory
• B) a decrease in days' sales in receivables from year to year
• C) a reduction in the debt ratio
• D) net cash provided by operating activities is consistently lower than net income

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Definitions:

Relative Market Share

A measure of the product’s strength in a particular market, defined as the sales of the focal product divided by the sales achieved by the largest firm in the industry.

Boston Consulting Group

A global management consulting firm known for its expertise in business strategy and for developing the BCG matrix, a tool for portfolio analysis.

Competitive Advantage

An attribute that allows an organization to outperform its competitors, often through unique resources, capabilities, or position.

Product Line

A group of related products marketed by a company, which caters to a particular customer segment, need, or preference.