Which of the Following Is NOT a Situation That Might

question 16

Multiple Choice

Which of the following is NOT a situation that might lead a firm to increase its holdings of short-term marketable securities?

• A) The firm is going from its peak sales season to its slack season, so its receivables and inventories will experience a seasonal decline.
• B) The firm is going from its slack season to its peak sales season, so its receivables and inventories will experience seasonal increases.
• C) The firm has just sold long-term securities and has not yet invested the proceeds in operating assets.
• D) The firm just won a product liability suit one of its customers had brought against it.
• E) The firm must make a known future payment, such as paying for a new plant that is under construction.

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Definitions:

Freight Costs

Expenses associated with the transportation of goods from one location to another.

Cost Of Goods Sold

The direct costs associated with producing goods that a company sells, including materials and labour, used to determine gross profit.

Work-In-Process

Partially finished goods that are still in the production process at the end of an accounting period.

Finished Goods

Products that are finished with the production process but remain unsold to any customer.