Which of the Following May Be Signs of Future Problems

question 117

Multiple Choice

Which of the following may be signs of future problems for a company?
I. Inventories growing faster than sales.
II. Rapidly increasing debt to equity ratio.
III. Cash flow from operations is higher than net income.
IV. Current liabilities increasing faster than current assets.

• A) I and III only
• B) II and IV only
• C) I, II and IV only
• D) I, II and III only

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Definitions:

Excise Tax

A tax directly levied on certain goods, services, and activities such as tobacco, alcohol, and gambling.

Tax Structure

Specifies how a tax depends on the tax base; usually expressed in percentage terms.

Tax Base

The measure or value, such as income or property value, that determines how much tax an individual pays.

Taxation

The process whereby authorities impose financial charges on citizens or corporations to fund government spending and public expenditures.