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Question 1:
Use of the percentage-of-completion method, versus the completed contract method results
in:
A. higher debt equity ratios and cash flows.
B. higher profitability ratios in the early years of the contract.
C. higher total income over the life of the contract.
 
Correct Answer: B
Explanation: Percentage of completion results in the same cash flows and income over the life of the
contract. In the early years of the contract, the profit margins will be higher.
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