Net income assumes that all revenues are eventually realized as cash inflows and all expenses as cash outflows.The quality of income ratio is a measure of the extent to which this assumption should be considered valid.
BT: Analysis

Question

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The quality of income ratio measures the proportion of net income that is supported by cash flows from operations, indicating the degree to which net income is based on actual cash transactions rather than non-cash accounting entries. Therefore, it is a measure of the quality, or validity, of net income.

Net Income Assumes That All Revenues Are Eventually Realized as Cash