Eastern Manufacturing Products Inc.

Eastern assembles computers in the owner's garage from parts the owner orders over the Internet. This industry is characterized by low

barriers to entry, including few operating licenses or governmental appravals, and small investments in productive equipment or

facilities.

How would you expect this situation to affect the assessment of Eastern's financial condition and performance?

Its low barriers to entry expose Eastern to increased risk of competition, which could negatively affect the predictability of its expected

future sales revenues.

Its low barriers to entry expose Eastern to decreased risk of competition, which could improve the predictability of its expected future

sales revenues.

Although nonquantitative factors may be relevant to a company's financial evaluation in general terms, the details of this specific situation

are not relevant to the firm's financial condition or performance.