The Aggressive Financing Strategy Is Risky in Two Aspects: a Firm

question 67

Multiple Choice

The aggressive financing strategy is risky in two aspects: a firm operates with a possibility of ________, and a firm has only a limited amount of ________ capacity.

• A) insolvency; short-term borrowing
• B) interest rate swings; short-term borrowing
• C) low earnings; long-term borrowing
• D) fixed interest rate; long-term borrowing

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Definitions:

Earnings Per Share

A company's profit divided by the number of outstanding shares of its common stock, indicating the company's profitability.

Quick Ratio

A liquidity indicator that measures a company's ability to meet its short-term obligations with its most liquid assets.

Marketable Securities

Financial instruments that can be easily converted to cash, typically within one year, such as stocks or bonds.

Inventory

The raw materials, work-in-progress products, and finished goods that are considered to be part of a business's assets that are ready or will be ready for sale.