Corporation X has no short-term investments,carries only a minimal amount of cash,and has a capital acquisitions ratio of 0.7.Which of the following is suggested by these facts?
A)The corporation probably needed external financing to fund property,plant,and equipment replacement this period.
B)The corporation is efficient at managing debt; each $.70 of debt generates $1 of asset value.
C)The corporation is efficient at generating cash; each $1 of assets acquired generates $.70 of cash.
D)The corporation is likely to need to replace equipment at a rate of 70% of its net income.

Question

Quizplus · Accepted Answer

The capital acquisitions ratio of 0.7 suggests that the corporation is using 70% of its net income to fund capital expenditures, indicating a likelihood of needing external financing for property, plant, and equipment replacement.

Corporation X Has No Short-Term Investments,carries Only a Minimal Amount