Which of the following statements about the capital acquisitions ratio is incorrect?
A)The ratio is computed by dividing cash flow from operating activities by cash paid for property,plant,and equipment.
B)Because the need for investment in property,plant,and equipment differs dramatically across industries,a firm's ratio should only be compared with its prior years' ratio or with firms in the same industry.
C)A high ratio indicates more need for outside financing of current and future purchases of property,plant,and equipment.
D)The ratio increases when an account receivable is collected.

Question

Quizplus · Accepted Answer

A high capital acquisitions ratio indicates that a company is generating enough cash from operating activities to cover its investments in property, plant, and equipment, suggesting less need for outside financing, not more.

Which of the Following Statements About the Capital Acquisitions Ratio