A Reduction in the Ratio Net Sales/average Property, Plant and Equipment

question 6

Multiple Choice

A reduction in the ratio net sales/average property, plant and equipment over time could mean:

• A) there is an elevated level of inflation.
• B) the price of plant and equipment is falling.
• C) the firm may be heading for a liquidity crisis.
• D) there is an over-investment in plant and equipment.

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Definitions:

Share Rights Plans

Strategic measures employed by companies to ward off hostile takeovers by diluting the value of shares held by potential acquirers.

Golden Parachute

A large financial compensation package guaranteed to a company executive in the event of a forced departure or takeover.

Hostile Takeover

An acquisition attempt by a company or individual that is strongly opposed by the target company's management and board of directors.

Equity Carve-out

A corporate strategy where a company sells a portion of the equity of a wholly owned subsidiary or division through an initial public offering.