The Primary Reason a Firm Holds Marketable Securities Is Because

question 17

Multiple Choice

The primary reason a firm holds marketable securities is because they:

• A)substitute for its long-term debt.
• B)offer a place to temporarily invest cash balances to earn high rates of return.
• C)are useful for managing credit sales.
• D)can be used to help speed up collections of its accounts payable.
• E)permit the firm to earn positive returns on cash that is not needed to pay bills in thecurrent period.

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Definitions:

Times Interest Earned Ratio

A financial metric used to determine how easily a company can pay interest on outstanding debt with its before-tax earnings.

Interest Expense

The expense an entity faces for using borrowed capital, usually shown on the income statement.

Wage Bracket Withholding Table

A chart used by employers to determine the amount of tax to withhold from an employee’s paycheck based on their earnings and tax bracket.

Federal Income Taxes

Taxes levied by the government on the income earned by individuals, corporations, trusts, and other legal entities.