Which of the following statements about the quality of earnings ratio is false?
A)An increase in operating assets and a decrease in liabilities will reduce operating cash flows,thereby reducing the ratio.
B)Seasonal variations in sales and purchases of inventory can cause wide deviations in the quality of earnings ratio.
C)When sales are growing,receivables and inventory normally increase at a faster rate than trade payables often causing operating cash flows to be less than profit.
D)Seasonal variations in sales have no impact on the quality of earnings ratio.

Question

Quizplus · Accepted Answer

This statement is false. Seasonal variations in sales can have a significant impact on the quality of earnings ratio, as they affect the consistency and predictability of future earnings. A decrease in cash flows due to seasonal fluctuations could lower the quality of earnings ratio. Therefore, Option D is the correct answer.

Which of the Following Statements About the Quality of Earnings