Onestep in assessing the quality of earnings is to look for red flags. Anexample of a red flag is a significant increase in accounts receivablewithout commensurate growth in sales (that is, accounts receivableturnover decreases). List and discuss at least five other red flags theastute analyst might look for, explain why each is a red flag, andidentify where the analyst might find this information.
Usingyour example, discuss how monitoring the financial results of acompany’s competitors over time might help raise or explain red flags.
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