Table 152 the Company Earns 5 Percent on Current Assets

question 273

Multiple Choice

Table 15.2 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 $3,000 of current assets to fixed assets, the firm's net working capital would ________, the annual profits on total assets would ________, and the risk of technical insolvency would ________, respectively. (See Table 15.2)

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

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Definitions:

Voidable

describes a contract or transaction that is valid and enforceable on its face, but may be deemed void by one or more of the parties due to certain conditions.

Disaffirm

The act of rejecting, denying, or voiding a contract or agreement, especially one entered into by a minor or under conditions that render it voidable.

Age Of Majority

The legal age at which an individual is considered legally competent to consent to contracts and manage personal affairs; varies by country, generally 18 or 21 years old.

Emancipated

Refers to a minor who has been legally freed from control by their parents or guardians, obtaining adult rights and responsibilities.