DECA Accounting Applications Practice Exam 2025 – Complete Prep Guide

Question: 1 / 400

What would indicate poor financial sustainability in a company?

High levels of debt combined with consistent revenue

High levels of debt combined with consistent revenue indicate poor financial sustainability because it suggests that the company is relying heavily on borrowed funds to operate and grow. While consistent revenue is a positive sign, when it is coupled with high levels of debt, it can create a precarious financial situation. If a significant portion of revenue is used to service this debt through interest and principal repayments, there may be limited funds available for other critical areas such as investment in business growth, innovation, and operational stability. This reliance on debt increases financial risk, especially if revenue fluctuates or economic conditions change. Sustainable financial health generally features a balance where debt is manageable relative to a company’s earnings and resources, enabling flexibility to adapt to changing circumstances and pursue growth opportunities.

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Long-term investments in growth projects

Constantly meeting short-term financial obligations

Regular evaluations of resource allocation

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