Which of the Following Is NOT a Situation That Might

question 65

Multiple Choice

Which of the following is NOT a situation that might lead a firm to increase its holdings of short-term marketable securities?

• A) The firm must make a known future payment,such as paying for a new plant that is under construction.
• B) The firm is going from its peak sales season to its slack season,so its receivables and inventories will experience a seasonal decline.
• C) The firm is going from its slack season to its peak sales season,so its receivables and inventories will experience seasonal increases.
• D) The firm has just sold long-term securities and has not yet invested the proceeds in operating assets.
• E) The firm just won a product liability suit one of its customers had brought against it.

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Definitions:

Liabilities

Obligations of a company or organization due to past transactions or events, resulting in the future sacrifice of economic benefits.

Stockholders' Equity

The ownership interest of shareholders in the assets of a corporation, after all liabilities have been subtracted.

Accounts Payable

The amounts owed by a business to its suppliers or creditors for goods and services received, representing short-term liabilities.

Accounts Receivable

Funds that are due to a company from its clients for the delivery of goods and services which payment is pending.