Westmoreland Company
Following are selected data from Westmoreland Company's financial statements.

\begin{array}{lrr}&2018&2017\\\text { Current liabilities } & \$ 230,000 & \$ 160,000 \\\text { Long-term debt } & 120,000 & 320,000 \\\text { Stockhol ders' equity } & 420,000 & 540,000 \\\text { Cash payments for additions to plant and equipment } & 45,000 & 32,000 \\\text { Net cash flow from operating activities } & 80,000 & 51,000 \\\text { Interest and principal payments } & 12,000 & 8,000 \\\text { Net operating cash flows before interest and taxes } & 68,000 & 43,000 \\\text { Net income } & 90,000 & 72,000 \\\text { Interest expense } & 8,500 & 11,500 \\\text { Income taxes } & 16,000 & 14,500 \\\text { Dividends paid } & 15,000 & 30,000\end{array}

-Refer to the Westmoreland Company data.
The company's debt-to-equity ratio was 0.83 to 1 in 2018 and 0.89 to 1 in 2017.Which of the following statements is true concerning Westmoreland?
A)The company has a smaller percentage of capital from owners at the end of 2018 than at the end of 2017.
B)The company relied more on creditors for financing during 2018 than in 2017.
C)The company is improving its debt-to-equity ratio.
D)The company appears to be in a weaker position at the end of 2018 to finance capital expenditures from cash flow generated by operating activities.

Which of the Following Is the Most Serious Limitation to Financial

Multiple Choice

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