Which of the Following Statements About the Capital Acquisitions Ratio

question 103

Multiple Choice

Which of the following statements about the capital acquisitions ratio is incorrect?

• A)The ratio is computed by dividing cash flow from operations by cash paid for property, plant and equipment.
• B)Because the need for investment in property, plant and equipment differs dramatically across industries, a firm's ratio should only be compared with its prior years' ratio or with firms in the same industry.
• C)A high ratio indicates more need for outside financing of current and future purchases of property, plant and equipment.
• D)It increases when an account receivable is collected.

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