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NISM Certifications · NISM-Series-XV: Research Analyst · Company Analysis - Business and Governance

Which of the following is most likely to be a qualitative indicator of strong management quality that a research analyst would look for?

A consistent record of meeting guidance combined with transparent disclosures indicates good management quality. Frequent unexplained auditor changes, aggressive revenue recognition and large loans to group entities are red flags, not signs of strong management.

  1. AFrequent changes of statutory auditors without explanation
  2. BConsistent track record of meeting guidance with transparent disclosuresCorrect
  3. CAggressive revenue recognition policies
  4. DLarge unexplained loans to group entities

Explanation

Reliable delivery on stated targets and clear, transparent disclosure indicate credible management. The other options are warning signs relating to auditor changes, aggressive accounting and unexplained intra-group loans.

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