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

Question

Quizplus · Accepted Answer

Increasing EBIT (earnings before interest and taxes) while holding sales and assets constant would make the company financially stronger. EBIT is a measure of a company's operating profitability and increasing it would result in higher net income and cash flow. Increasing accounts receivable, accounts payable, notes payable, or inventories without a corresponding increase in sales would tie up cash and potentially weaken the company's financial position.

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