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Option 2 is correct - There is a higher probability of experiencing Financial distress.</h3>
Firms with volatile operating income tend to have lower debt ratios because there is a higher probability of experiencing financial distress.
Financial distress is a condition in which a company or individual cannot generate sufficient revenues or income, making it unable to meet or pay its financial obligations. This is generally due to high fixed costs, a large degree of illiquid assets, or revenues sensitive to economic downturns.
Following reasons can lead to financial distress in a firm.
- Cash flows - The first sign that things are going wrong is a constant shortage of cash. The old adage that cash is king exists for a reason
- Falling margins and poor profits - Experienced entrepreneurs have learnt that for long-term survival what matters are profits, not only sales. Poor profits are usually the first indicators that a business is not doing well.
- Poor sales growth or decline in revenues - When there is no sales growth despite extreme marketing activities, this could indicate a lack of customer acceptance, which is key to any business success.
- Extended payment days - Another sign of possible trouble is a rise in either creditor or debtor payment days. If business has to delay payments to its creditors, this can force some suppliers to stop supplying
- Difficulty in raising capital - If a company is constantly borrowing and asking its investors to inject more capital, this is an underlying sign that it is increasingly finding it difficult to self-sustain.
Hence, Firms with volatile operating income tend to have lower debt ratios because there is a higher probability of experiencing financial distress.
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Answer:
C) your willingness and tolerance to bear risk
Explanation:
Long term investment is the act of wealth creation for a future use of money.
investing into long terms involves some patience and risks because, investment like this cannot be for seen, it fluctuate sometimes leading to appreciation or depreciation in the value of money.
this helps in bringing maximum returns for your money over a period of more than 10 years. to better maximize these returns involves a lots of patience, tolerance and risks
D. Because he is listening to her fully and making sure he fully understands what she is asking
The way in which copyright protection is secured is frequently misunderstood. Copyright is secured automatically when the work is created. A work is "created" when it is fixed into a book, tape or electronic medium for the first time.
Answer:
During a period of inflation, Mast’s ending inventory and income tax payable will be higher using LIFO than FIFO.
Explanation:
In a period of inflation the closing inventory will be higher because of increase in price. In LIFO the oldest unit is sold first and the last purchased remains in the inventory. So Closing inventory is higher which decrease the Cost of goods sold and Increase in profit and ultimately Increase in Taxes as well. In FIFO the Newest unit is sold first and the oldest unit purchased remains in the inventory. So closing inventory is lower which increase the Cost of goods sold and decrease in profit and ultimately decrease in Taxes as well.
