Use the following for questions 17-20 2004 2005 2006 2007 - - Times Interest Ear

Question

Use the following for questions 17-20 2004          2005          2006          2007

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-    Times Interest Earned 14.3            15.6            15.1            10.8

-    Net Sales/Cash from sales 0.99            0.98            1.01            1.02

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-    Net Sales/Net Accounts Receivable                 12.0            11.4            11.0            11.2

-    Sales/Unearned Revenues 11.45          12.55          14.52          22.68

-    Net Sales/Warranty Liabilities 114             126             118             69

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17.     Which of the expense diagnostic ratios would provide a “red flag” raising concerns that expenses may have been understated for the purpose of overstating net income in 2007?

Net Sales/Cash from sales

Times Interest Earned

CFFO/OI (Cash Flow from Operating Activities)/(Operating Income)

CFFO/NOA (Cash Flow from Operating Activities)/(Net Operating Assets)

Asset Turnover

Explanation / Answer

Use the following for questions 17-20 2004 2005 2006 2007 - - Times Interest Ear

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