A Company Has a Debt Contract in Place Which Requires

question 56

Multiple Choice

A company has a debt contract in place which requires that the company's working capital (ratio of current asset to current liabilities) must never fall below 2.As balance date approaches,the company estimates that the working capital ratio will be 1.9 and the company may default on its debt contract unless remedial action is taken.Which of the following action(s) will increase the company's working capital at balance day?

• A) revalue plant and equipment by 10%
• B) increase allowance for doubtful debts by 10%
• C) increase provision for warranty claims by 10%
• D) accelerate recognition of credit sales by 10%

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Definitions:

Fundamental Attribution Error

The tendency to overemphasize personality traits and underestimate situational factors when explaining someone else's behavior.

Internal Dispositions

Enduring personality traits, attitudes, or behaviors that an individual consistently exhibits across different situations.

Situational Determinants

These refer to external factors or environmental conditions that influence an individual's behavior, emotions, and decisions in different contexts.

Conformity

A change in behavior due to explicit or implicit social pressure.