A Company Has a Debt Contract in Place Which Requires

question 50

Multiple Choice

A company has a debt contract in place which requires 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%
• E) Reduce depreciation of plant and equipment by 10%.

---

Definitions:

Door-In-The-Face Technique

A persuasion strategy where a large, unreasonable request is first made knowing it will be refused so that a smaller, more moderate request will be accepted.

Sleeper Effect Method

A phenomenon where a message that was initially discounted gains in persuasiveness over time, often due to the dissociation of the message from its source.

Attraction

A force that draws individuals together, leading to friendships, romantic relationships, or other forms of social interaction.

Similarity

The state of being alike or having attributes in common, often used in psychology to explain patterns of grouping in perception and social relationships.