A Firm Wants to Strengthen Its Financial Position

question 7

Multiple Choice

A firm wants to strengthen its financial position. Which of the following actions would increase its current ratio?

• A) Reduce the company's days' sales outstanding to the industry average and use the resulting cash savings to purchase plant and equipment.
• B) Use cash to repurchase some of the company's own stock.
• C) Borrow using short-term debt and use the proceeds to repay debt that has a maturity of more than one year.
• D) Issue new stock, then use some of the proceeds to purchase additional inventory and hold the remainder as cash.
• E) Use cash to increase inventory holdings.

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Definitions:

Enantiomer

One of two stereoisomers that are mirror images of each other but cannot be superimposed, usually differing in optical activity.

Asymmetric Carbon

A carbon atom bonded to four different atoms or groups, thus making it a chiral center.

R or S Configuration

A system for denoting the absolute configuration of chiral centers in molecules by their spatial arrangement.

Configurational Label

A notation used in chemistry to describe the spatial arrangement of atoms within molecules that cannot be changed without breaking chemical bonds.