The correct answer is: A. a-1, b-3, c-2, d-4.
ABC analysis is a method of inventory control in which items are classified into three categories (A, B, and C) based on their annual dollar usage. Items in category A are the most important items, and they require the most attention from management. Items in category B are less important, and they require less attention from management. Items in category C are the least important items, and they require the least attention from management.
The Walter model is a model that is used to determine the optimal dividend payout ratio. The model takes into account the firm’s investment opportunities, its tax rate, and its shareholders’ risk preferences.
Capital rationing is a situation in which a firm has more investment opportunities than it has funds available to finance them. In this situation, the firm must decide which projects to undertake and which projects to reject.
The net operating income approach is a method of capital budgeting that uses the net operating income (NOI) of a project to determine its profitability. The NOI of a project is calculated by subtracting the project’s operating expenses from its operating revenues.
Working capital management is the management of a firm’s short-term assets and liabilities. The goal of working capital management is to ensure that the firm has enough cash on hand to meet its short-term obligations, while also not tying up too much money in unproductive assets.
Here is a brief explanation of each option:
- Option A: a-1, b-3, c-2, d-4. This is the correct answer. ABC analysis is a method of inventory control, and it is used to determine which items are the most important and require the most attention from management. The Walter model is a model that is used to determine the optimal dividend payout ratio. Capital rationing is a situation in which a firm has more investment opportunities than it has funds available to finance them. The net operating income approach is a method of capital budgeting that uses the net operating income (NOI) of a project to determine its profitability.
- Option B: a-2, b-1, c-4, d-2. This is not the correct answer. ABC analysis is a method of inventory control, and it is not used to determine the optimal dividend payout ratio. The Walter model is a model that is used to determine the optimal dividend payout ratio, and it is not used to determine which items are the most important and require the most attention from management. Capital rationing is a situation in which a firm has more investment opportunities than it has funds available to finance them, and it is not used to determine the net operating income (NOI) of a project. The net operating income approach is a method of capital budgeting that uses the net operating income (NOI) of a project to determine its profitability, and it is not used to determine which items are the most important and require the most attention from management.
- Option C: a-4, b-1, c-2, d-3. This is not the correct answer. ABC analysis is a method of inventory control, and it is not used to determine the net operating income (NOI) of a project. The Walter model is a model that is used to determine the optimal dividend payout ratio, and it is not used to determine which items are the most important and require the most attention from management. Capital rationing is a situation in which a firm has more investment opportunities than it has funds available to finance them, and it is not used to determine the optimal dividend payout ratio. The net operating income approach is a method of capital budgeting that uses the net operating income (NOI) of a project to determine its profitability, and it is not used to determine which items are the most important and require the most attention from management.
- Option D: a-3, b-1, c-2, d-4. This is not the correct answer. ABC analysis is a method of inventory control, and it is not used to determine the capital structure of a firm. The Walter model is a model that is used to determine the optimal dividend payout ratio, and it is not used to determine the capital structure of a firm. Capital rationing is a situation in which a firm has more investment opportunities than it has funds available to finance them, and it is not used to determine the capital structure of a firm. The net operating income approach is a method of capital budgeting that uses the net operating income (NOI) of a project to determine its profitability, and it is not used to determine the capital structure of a firm.