Analysts Look for Red Flags in Financial Statements That May

question 166

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 dividend payout ratio from year to year
• C)a reduction in the debt ratio
• D)net cash flow from operating activities is consistently lower than net income

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Definitions:

Contactor Unit

An electrically-controlled switch used for switching an electrical power circuit, commonly used in lighting and electric motor circuits.

Overcurrent

A condition where the current exceeds the rated current of equipment or the capacity of conductors, potentially causing damage or hazard.

Low Intensity

Describes a relatively weak level of power, brightness, or energy output, often used in the context of lights or signals.

Fault Current

The excessive electrical current that flows through a circuit during a fault condition.