Series 79 practice questioneasyFinancial Statement Analysis
An increase in a company’s deferred revenue balance most likely indicates:
- AA cash shortfall
- BAccelerated depreciation
- CDeferred tax liability
- DReceipt of cash prior to revenue recognition✓ Correct answer
Explanation
Why D — Receipt of cash prior to revenue recognition
Deferred revenue arises when cash is received before goods or services are delivered, so revenue is recognized later. Mistaking it for a cash shortfall is a common error.
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