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Investment analysts employ ratio and trend analysis when assessing a company's financial statements. Some trends...

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Finance

  1. Investment analysts employ ratio and trend analysis when assessing a company's financial statements. Some trends reveal company improvement and others suggest possible "red flags" - trends that reveal possible deterioration in operational success. Which of the following would suggest a "red flag?"

    (1) Rising accounts receivable versus sales ratio

    (2) Rising inventory versus sales ratio

    (3) Rising debt versus total asset ratio

    (4) Rising shareholder equity to total assets ratio

    a.

    1 and 2
    b.

    3 and 4
    c.

    2 and 4
    d.

    1, 2 and 3

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