What Will Be the Effect of a Sale of a Piece

question 24

Multiple Choice

What will be the effect of a sale of a piece of equipment at book value for cash?

• A) An increase in working capital.
• B) A decrease in working capital.
• C) A decrease in the debt-to-equity ratio.
• D) An increase in net income.

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Definitions:

Default

Failure to fulfill a legal obligation, especially failing to make a required payment on a loan or financial agreement.

Time Instrument

A financial document or negotiable instrument that promises payment of a certain sum of money at a future date, as opposed to on demand.

Payment

A financial transaction where money is transferred in exchange for goods or services.

Future Date

A specified day in the future on which an event is planned or expected to occur.