$\text { Flum Packages, Inc. }$ The Company Earns 5 Percent on Current Assets and 15

question 181

Multiple Choice

$\text { Flum Packages, Inc. }$

$\begin{array}{lrlr}\text { Assets }&&\text { Liabilities \& Equity }\\\hline\text { Current assets } & \$ 10,000 & \text { Current Liabilities } & \$ 5,000 \\\text { Fixed assets } & 20,000 & \text { Long-term debt } & 12,000 \\& & \text { Equity } & 13,000\\&---&&---\\\text { Total }&\$30,000&\text { Total }&\$30,000\end{array}$
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.
-If the firm was to shift $7,000 of fixed assets to current assets, the firm's net working capital would__________, the annual profits on total assets would__________and the risk of not being able to meet current obligations would__________, respectively

• A) decrease; increase; decrease
• B) increase; decrease; decrease
• C) increase; decrease; increase
• D) decrease; increase; increase

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Definitions:

Type I Error

The error made when a true null hypothesis is incorrectly rejected, often referred to as a "false positive."

P Value

The probability of obtaining test results at least as extreme as the results actually observed, assuming that the null hypothesis is true.

Confidence

The degree of certainty or trust in a statistical or experimental result, often expressed as a confidence interval or level.

Test Statistic

A calculated value from sample data used to determine whether to reject the null hypothesis within the framework of a statistical test.