If net cash flow from operating activities is unchanged, but net income is increasing, the quality of income ratio will:
A) rise, which may signal that revenue is being recorded later and/or expenses earlier than in the past.
B) fall, which may signal that revenue is being recorded later and/or expenses earlier than in the past.
C) fall, which may signal that revenue is being recorded earlier and/or expenses later than in the past.
D) rise, which may signal that revenue is being recorded earlier and/or expenses later than in the past.

Question

Quizplus · Accepted Answer

The quality of income ratio is calculated as cash flow from operating activities divided by net income. If net income increases while cash flow remains unchanged, the ratio will fall, suggesting that revenue might be recorded earlier or expenses later, potentially inflating net income.

If Net Cash Flow from Operating Activities Is Unchanged, but Net