Which of the Following Actions Would Improve a Firm's Liquidity

question 24

Multiple Choice

Which of the following actions would improve a firm's liquidity?

• A) purchasing inventories for cash
• B) purchasing inventory on trade credit
• C) purchasing inventory with long-term debt
• D) buying machinery with long-term debt

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Definitions:

Operating Leases

Leasing agreements for the use of assets without the intent of ownership transfer, where payments are considered operating expenses.

Time Value

A concept stating that money available now is worth more than the same amount in the future due to its potential earning capacity.

Concept

A general idea or understanding that represents a class of thoughts, objects, or phenomena within a certain framework or theory.

Debt-to-equity Ratio

A ratio measuring the balance between shareholder equity and debt in the capital structure used for financing assets.