A company's quarterly income statements show that in the last three quarters both sales revenue and net income have been falling. Which of the following conclusions drawn by users are valid, given this information?

Question

Quizplus · Accepted Answer

The only valid conclusion that can be drawn from the falling sales revenue and net income is that the owners may conclude that the company will be less likely to distribute dividends. None of the other conclusions are supported by the given information. Creditors may be less willing to lend to the company if they see falling revenues and profits, and investors would be less likely to see the company as an attractive investment if its financial performance continues to decline.

A Company's Quarterly Income Statements Show That in the Last