Which One of the Following Transactions Will Increase the Liquidity

question 17

Multiple Choice

Which one of the following transactions will increase the liquidity of a firm?

• A)using cash to purchase new equipment
• B)increasing short-term debt while decreasing long-term debt by an equivalent amount
• C)issuing long-term debt to repurchase shares of outstanding stock
• D)increasing the sales on credit while reducing cash sales by the same amount
• E)selling inventory on credit

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Definitions:

Investment Account

An account held at a financial institution that contains securities, cash, and other assets for investment purposes.

Subsidiary

A company that is controlled by another company, known as the parent company, through majority ownership.

Dividends

Payments made by a corporation to its shareholders, usually as a distribution of profits.

Investment in Grub

An allocation of resources into a project or company named Grub, expecting future returns.