BUSINESS ADMINISTRATION
FINANCIAL MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Borrow short term to finance additional fixed assets.
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Issue long-term debt to buy inventory.
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Sell common stock to reduce current liabilities.
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Sell fixed assets to reduce accounts payable.
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Detailed explanation-1: -The answer would be to Borrow short term to finance additional fixed assets.
Detailed explanation-2: -Which of the following would NOT improve the current ratio? Borrow short term to finance additional fixed assets.
Detailed explanation-3: -Increasing the accounts receivable will increase the current assets and increase the current ratio. An increase in the accounts payable will increase the current liabilities.
Detailed explanation-4: -When plant is acquired on account the fixed asset would increase and there would be increase in the creditors amount, hence the current ratio would decrease.
Detailed explanation-5: -When debentures are converted into equity capital there would be no changes in current assets and current liabilities and so no change in current ratio.