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Answer (C) is correct . Strickland’s times interest earned, debt/equity ratio, and degree of financial leverage all reveal that Strickland is less leveraged than its competitor. The two firms’ price-earnings ratios are comparable, so Strickland should be able to raise new capital fairly easily, either debt or equity. Thus, Strickland should seek additional sources of outside financing for new product introductions.

Answer (A) is incorrect because Cutting costs makes it harder to take advantage of new opportunities or to innovate. Cost cutting is a last resort and Strickland’s return on assets is already better than its competitor’s.
Answer (B) is incorrect because The receivables turnover is not much different than that of the competitor.
Answer (D) is incorrect because Increasing investment in short-term securities would not change the current ratio.