Flum Packages, Inc The Company Earns 5 Percent on Current Assets and 15

question 115

Multiple Choice

Flum Packages, Inc.

$\begin{array}{lrlr}\text { Assets }&&\text { Liabilities \& Equity }\\\hline \text { Current assets } & \$ 10,000 & \text { Current Liabilities } & \$ 5,000 \\\text { Fixed assets } & 20,000 & \text { Long-term debt } & 12,000 \\& & \text { Equity } & 13,000\\&----&&---\\\text { Total }&\$30,000&\text { Total }&\$30,000\\\end{array}$
The company earns 5 percent on current assets and 15 percent on fixed assets. The firm's current liabilities cost 7 percent to maintain and the average annual cost of long-term funds is 20 percent.
-The firm would like to increase its current ratio. This goal would be accomplished most profitably by

• A) increasing current liabilities.
• B) increasing current assets.
• C) decreasing current liabilities.
• D) decreasing current assets.

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Definitions:

Stress

A feeling of emotional or physical tension that can come from any event or thought that makes one feel frustrated, angry, or nervous.

Sexual

Pertaining to, involving, or characteristic of sex, sexual activity, or sexual reproduction in living beings.

Calm

A state of peacefulness and tranquility, free from stress or agitation.

Autonomic

Relating to the autonomic nervous system, which controls involuntary bodily functions such as heart rate, digestion, and respiratory rate.