A Company Has a Debt Contract in Place Which Requires

question 50

Multiple Choice

A company has a debt contract in place which requires the company's working capital (ratio of current asset to current liabilities) must never fall below 2.As balance date approaches,the company estimates that the working capital ratio will be 1.9 and the company may default on its debt contract unless remedial action is taken.Which of the following action(s) will increase the company's working capital at balance day:

• A) Revalue plant and equipment by 10%.
• B) Increase allowance for doubtful debts by 10%.
• C) Increase provision for warranty claims by 10%
• D) Accelerate recognition of credit sales by 10%
• E) Reduce depreciation of plant and equipment by 10%.

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Definitions:

Continental Crust

The layer of igneous, sedimentary, and metamorphic rocks that forms the continents and the areas of shallow seabed close to their shores.

Felsic Composition

Rocks rich in silica and aluminum, characterized by lighter minerals like quartz and feldspar.

Decompression

The reduction in pressure exerted on a material, often leading to changes in its physical state or phase.

Melting Mantle

The process in which the Earth's mantle, the layer between the crust and the core, experiences partial melting to form magma.