Dorcas Corporation reported sales revenue of $257,000, net income of $45,300, cash of $9,300, and net cash provided by operating activities of $23,200. Accounts receivable have increased at three times the rate of sales during the last 3 years.

Instructions

(a) Explain what is meant by high quality of earnings.

(b) Evaluate the quality of the company’s earnings. Discuss your findings.

(c) What factors might have contributed to the company’s quality of earnings?

AppendixLO1