Which of the Following Statements About the Quality of Earnings

Multiple Choice

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 have no impact on the quality of earnings ratio.
C) Seasonal variations in sales and purchases of inventory can cause wide deviations in the quality of earnings ratio.
D) 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.