Which of the following accurately indicates that a company may be in distress?

A ratings downgrade to below CCC is a clear indicator that a company may be in financial distress. Credit ratings serve as an assessment of a company's creditworthiness, and a downgrade to this level typically suggests that the company is facing significant challenges in meeting its financial obligations. Such a low rating signals that lenders and investors have reduced confidence in the company's ability to repay debt, which is often due to deteriorating financial conditions or an increased likelihood of default. Ratings in this range reflect a situation where the company may be struggling with liquidity or operational issues, making it vulnerable to bankruptcy or restructuring.

In contrast, strong equity trading above par, profitable operations with high cash flow, and high market capitalization demonstrate financial health and operational stability. These conditions indicate that a company is likely performing well, generating sufficient revenue, and retaining investor confidence, thereby reducing the likelihood of distress. In summary, a downgrade below CCC represents a significant warning sign, differentiating it from the other options that signify a healthier corporate environment.