Which of the Following Statements About the Capital Acquisitions Ratio

question 81

Multiple Choice

Which of the following statements about the capital acquisitions ratio is incorrect?

• A)The ratio is computed by dividing cash flow from operating activities by cash paid for property, plant, and equipment.
• B)Because the need for investment in property, plant, and equipment differs dramatically across industries, a firm's ratio should only be compared with its prior years' ratio or with firms in the same industry.
• C)A high ratio indicates more need for outside financing of current and future purchases of property, plant, and equipment.
• D)The ratio increases when an account receivable is collecteD.The capital acquisitions ratio is calculated by dividing cash flow from operating activities by cash paid for property, plant, and equipment.A high ratio demonstrates less need for outside financing.

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Definitions:

Long-Term Benefit

Advantages or positive outcomes that accrue over an extended period, often associated with investments or strategic business decisions.

Shareholder Needs

The requirements or interests of individuals or entities that own shares in a corporation, often focused on return on investment.

Price Appreciation

The increase in the value of an asset or investment over time, not including the dividends or interest earned.

Current Income

The total amount of money earned within a specific time period, including wages, dividends, and interest.