Which of the following is a red flag according to Schilit?
A) cash flow from operations drops below net income
B) accounts receivable growing faster than sales
C) fluctuating gross margins over time
D) nepotism on the board of directors
E) all of the above

Question

Quizplus · Accepted Answer

All of the above are red flags according to Schilit. A drop in cash flow from operations below net income indicates poor quality of earnings, accounts receivable growing faster than sales could indicate potentially uncollectible debt, and fluctuating gross margins over time can suggest poor management or accounting practices. Nepotism on the board of directors could also indicate poor governance, but it is not specifically mentioned as a red flag by Schilit.

Which of the Following Is a Red Flag According to Schilit