In a Recession

question 20

Multiple Choice

In a recession:

• A) Budgets can be relaxed as there is more capital available.
• B) The number of failing organizations reduces.
• C) Retrenchment strategies are frequently required as demand falls and costs need containing.
• D) Strategies become obsolete.

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Definitions:

Basic Earning Power

An indicator of a company's profitability from operations, expressed as EBIT (Earnings Before Interest and Taxes) divided by total assets.

Total Assets

The sum of all current and non-current assets owned by an entity as reported on the balance sheet.

EBIT

Earnings Before Interest and Taxes; a measure of a firm's profit that includes all expenses except interest and income tax expenses.

Debt/Assets Ratio

A financial ratio that indicates the proportion of a company's assets that are financed by debt.