Streeter & Sons Is a Regional Service Company That Has

question 136

Multiple Choice

Streeter & Sons is a regional service company that has been in business for a few years, but has not employed a controller or anyone else full-time to keep track of its financial state. The company needs to take a good look at its financial state to determine whether it needs to make any changes in its practices, in order to prevent possible financial meltdown. Which of the following, if true, would strengthen the case that Streeter & Sons has too much debt?

• A) The company has grown only slowly since its beginning.
• B) The company's customer base has steadily increased in the last few years.
• C) The company is out-competing other similar companies in the area.
• D) The company's current liabilities are higher than its current and fixed assets.
• E) The company has built up a substantial amount of owners' equity.

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Definitions:

Investment

The allocation of resources, typically money, into an asset or venture with the expectation of generating income or profit.

Equal Investment

An investment strategy where equal amounts of capital are allocated to each asset or security in a portfolio.

Portfolio

A compilation of financial holdings comprising stocks, bonds, commodities, physical currency, and equivalents to cash, which cover mutual funds and ETFs.

Stocks

Shares of ownership in a corporation, representing a claim on part of the corporation's assets and earnings.