A Potential Investor,interested in Predicting the Earnings of a Company

question 60

Multiple Choice

A potential investor,interested in predicting the earnings of a company in the future,should examine the:

• A)Balance Sheet only.
• B)Income Statement only.
• C)Statement of Retained Earnings.
• D)Statement of Retained Earnings and Balance Sheet.

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Definitions:

Preceding Year

The year immediately before the current year.

Inventory Turnover

A ratio showing how many times a company's inventory is sold and replaced over a period, calculated as cost of goods sold divided by the average inventory.

Accounts Receivable Turnover

A financial ratio that measures how efficiently a company collects revenue from its credit sales, calculated by dividing net credit sales by the average accounts receivable.

Sales In Receivables

Likely refers to the concept of "Accounts Receivables" which are amounts owed by customers for goods or services delivered on credit.