Which of the Following Would Indicate an Improvement in a Company's

question 19

Multiple Choice

Which of the following would indicate an improvement in a company's financial position, holding other things constant?

• A) The current and quick ratios both increase.
• B) The inventory and total assets turnover ratios both decline.
• C) The debt ratio increases.
• D) The profit margin declines.
• E) The EBITDA coverage ratio declines.

---

Definitions:

Hard Rationing

The situation that occurs when a business cannot raise financing for a project under any circumstances.

Hard Capital Rationing

A situation where a company is unable to secure additional funding from external sources like equity or debt markets.

NPV Projects

Projects evaluated using the Net Present Value method, which calculates the difference between the present value of cash inflows and outflows over a period.

Internal Constraints

Limitations within an organization that restrict its ability to achieve its goals, such as budget constraints, limited manpower, or technology restrictions.