Which of the Following Could Offset the Higher Risk Exposure

question 52

Multiple Choice

Which of the following could offset the higher risk exposure a company would face if its current ratio and net working capital were relatively low?

• A) Its current assets would need to be highly liquid.
• B) Its accounts receivable collection policy could increase the average collection period.
• C) It could offer no discounts for early payment by its customers.
• D) It could buy back some of its shares in the open market in order to reduce its equity.

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Definitions:

Technology Improvement

Enhancements or advancements in technology that lead to more efficient processes or better quality outcomes.

MC

Stands for Marginal Cost, which is the cost incurred by producing one additional unit of a good or service.

Output

The quantity of goods or services produced within a given time period by a firm, sector, or economy.

U-Shaped Marginal Cost

A graphical representation of the cost incurred to produce one more unit of a good, which decreases at first due to increasing returns but eventually increases due to decreasing returns.