Which of the Following Actions-All Else Equal-Will Decrease a Firm's

question 61

Multiple Choice

Which of the following actions-all else equal-will decrease a firm's EVA?

• A)The firm raises its prices but ships the same amount of product.
• B)The firm reduces its inventory.
• C)The firm increases its borrowing to repurchase some of its shares.
• D)The firm increases its accounts receivable.

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Definitions:

Free Cash Flow

The cash that a company generates after accounting for cash outflows to support operations and maintain its capital assets.

Financing Activities

Transactions that involve raising funds for the company through borrowing or issuing equity.

Productive Capacity

The maximum output a system can produce over a specific period under normal conditions.

Income Taxes Payable

The amount of income taxes a company owes to the government that has not yet been paid.