A firm's new president wants to strengthen the company's financial position.Which of the following actions would make it financially stronger?

Question

Quizplus · Accepted Answer

Option B suggests increasing earnings before interest and taxes (EBIT), which would improve the financial position of the firm. This demonstrates the firm's ability to generate profits from its current assets, without increasing its spending or liabilities. Therefore, by holding sales and assets constant, the focus on increasing EBIT would make the company financially stronger. In contrast, options A, C, D and E all suggest increasing the company's liabilities or inventory, which may lead to a weaker financial position.

A Firm's New President Wants to Strengthen the Company's Financial