Which Factor Listed Is NOT a Good Indicator of Potential

question 30

Multiple Choice

Which factor listed is NOT a good indicator of potential financial failure?

• A) The client is constantly short of cash and working capital.
• B) The client has had increasing net losses for several years.
• C) The client's retained earnings were reduced by half as a result of a large dividend payout.
• D) The client relies heavily on debt financing, especially by financing permanent assets with short-term loans.

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Definitions:

Monopolistic

Pertaining to a market structure characterized by a single seller who has significant control over the market and prices.

Monopolistically Competitive

A market structure characterized by many firms selling similar but not identical products, allowing for some degree of market power and product differentiation.

Five Forces Model

A model developed by Michael Porter that helps us understand the five competitive forces that determine the level of competition and profitability in an industry.

Competitive Forces

Refer to the various external factors that influence the level of competition in an industry, impacting how businesses operate and compete. This includes rivals, threat of new entrants, supplier power, buyer power, and threat of substitute products or services.