The text discusses various factors that relate to the risk of a company facing financial distress or bankruptcy. Which of the following might be in indicator of risk, based on the discussion in the text?
A) The company has a high inventory turnover.
B) Most of the company's assets are fixed assets and intangible assets that would take considerable time to sell.
C) The company's sales are relatively stable over time.
D) The company is large, with a variety of different product lines.

Question

Quizplus · Accepted Answer

The text mentions that having a high proportion of fixed and intangible assets makes it difficult for a company to generate cash quickly in the event of financial distress or bankruptcy. Therefore, this would indicate a higher level of risk. The other options do not necessarily indicate risk, as high inventory turnover (A) and stable sales (C) could be positive indicators, and being a large company with product diversity (D) could actually lower risk through diversification.

The Text Discusses Various Factors That Relate to the Risk