Analysts Look for Red Flags in Financial Statements That May

question 144

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 significant decrease in net income for several years in a row
• B) a consistent movement in sales, merchandise inventory, and accounts receivable
• C) a reduction in the debt ratio
• D) operating activities are a major source of cash flows

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Definitions:

Relative Market Shares

A measure of a company’s sales in relation to the sales of its competitors, indicating the firm’s competitiveness in the market.

Question Marks

Products or businesses with high growth potential but also high risk due to uncertain market acceptance or competitive positioning, often found in portfolio analyses.

High Market Growth Rates

Periods when a particular market or industry experiences significantly higher than average increases in sales or revenue.

Relative Market Shares

A metric comparing a company's market share to that of its largest competitor, indicating competitiveness in the market.