Which of the following transactions increases the quality of income ratio?
A)The accrual of revenue.
B)The accrual of an expense.
C)The cash payment of an account payable.
D)The payment of a cash dividenD.The quality of income ratio is cash flow from operating activities divided by net income.Accrued expenses are incurred but not paid.They reduce net income but do not reduce cash flow.The decrease in net income (the denominator) therefore increases the quality of income ratio.

Question

Quizplus · Accepted Answer

The accrual of an expense reduces net income but does not reduce cash flow. This decrease in net income increases the quality of income ratio.

Which of the Following Transactions Increases the Quality of Income