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Problem Three: Identifying red flags
One step in assessing the quality of earnings is to look for red flags. An example of a red flag is a significant increase in accounts receivable without commensurate growth in sales (that is, accounts receivable turnover decreases). List five other red flags an astute analyst might look for. Also, provide the reason for it being a red flag, and identify where the analyst might find this information.
Volcanic Glass
A type of rock that forms from the rapid cooling of magma without crystallization, resulting in a smooth, glassy texture.
Volcanic Dome
A rounded mound formed by the slow extrusion of viscous lava from a volcano.
Composite Volcanoes
Composite volcanoes, also known as stratovolcanoes, are tall, conical volcanoes built up by many layers (strata) of hardened lava, tephra, pumice, and volcanic ash.
Rubble-covered
Describes a surface or area that is scattered with broken stones, bricks, and other fragments, often resulting from destruction or decay.
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