Recently the M&M Company Has Been Having Problems

question 86

Multiple Choice

Recently the M&M Company has been having problems.As a result,its financial situation has deteriorated.M&M approached the First National Bank for a badly needed loan,but the loan officer insisted that the current ratio (now 0.5) be improved to at least 0.8 before the bank would even consider granting the credit.Which of the following actions would do the most to improve the ratio in the short run?

• A) Using some cash to pay off some current liabilities.
• B) Collecting some of the current accounts receivable.
• C) Paying off some long-term debt.
• D) Selling some of the existing inventory at cost.
• E) Purchasing additional inventory on credit (accounts payable).

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Definitions:

Market Power

The ability of a company to influence the price and terms of products or services in the market, often due to its significant market share.

Two-Part Tariffs

A pricing strategy that consists of a fixed fee plus a variable usage fee.

Supply Chain

The entire system of producing and delivering a product or service, from the supplier of raw materials to the customer.

Chain Profits

The overall financial gains generated through the interconnected stages of a supply chain.