A Local Bakery Is Suddenly Inundated with Many More Orders

question 18

Multiple Choice

A local bakery is suddenly inundated with many more orders for wedding cakes than it has the physical capacity to make.Rather than turn away customers,the owner decides to rent another kitchen across town to fulfill all of the orders.But she needs to borrow money to pay for the rent and additional workers,the additional cost of which will be paid by the profits from the additional cakes.Which of the following ratios will be MOST affected by this decision?

• A) the bakery's short-term solvency ratio
• B) the bakery's long-term solvency ratio
• C) the bakery's profitability ratio
• D) the bakery's activity ratio
• E) the bakery's equity ratio

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