Which One of the Following Actions Is Indicative of a Restrictive

question 90

Multiple Choice

Which one of the following actions is indicative of a restrictive short-term financial policy?

• A)Granting increasing amounts of credit to customers
• B)Expanding the number of inventory items carried
• C)Increasing the firm's investment in the current accounts
• D)Minimizing the cash balances held by the firm
• E)Investing relatively large amounts in marketable securities

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Definitions:

ROA

Return on Assets, a profitability ratio that measures how efficiently a company can manage its assets to produce profit during a period.

Effective Utilization

Effective utilization refers to how efficiently resources, such as labor and equipment, are used to produce goods or services.

EBIT

Earnings before interest and taxes; a measure of a company's profitability that excludes interest and income tax expenses.

Quick Ratios

The quick ratio, also known as the acid-test ratio, measures a company's ability to meet its short-term obligations with its most liquid assets.