Which factor listed is NOT a good indicator of potential financial failure?
A) The client is constantly short of cash and working capital.
B) The client has had increasing net losses for several years.
C) The client's retained earnings were reduced by half as a result of a large dividend payout.
D) The client relies heavily on debt financing, especially by financing permanent assets with short-term loans.

Question

Quizplus · Accepted Answer

While reducing retained earnings through large dividend payouts may not be ideal, it is not necessarily an indicator of potential financial failure. The other factors listed (constant cash shortages, increasing net losses, and heavy reliance on debt financing) are all red flags that could lead to financial failure.

Which Factor Listed Is NOT a Good Indicator of Potential