medium · Principles of Finance financial-statements-markets-wc
An analyst calculates an Accruals Ratio for a firm and finds it has increased significantly while Net Income is also rising.
Which of the following 'Red Flags' is most likely present?
- Conservative accounting practices understating assets.
- Efficient inventory management reducing the cash conversion cycle.
- Aggressive revenue recognition leading to a mismatch between earnings and cash.
- High financial leverage amplifying the ROE.
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