1. All else equal, a firm that purchases raw materials on credit will experience:

a. a decrease in trade credit with a given increase in purchases

b. no change in trade credit with a given increase in purchases.

c. an increase in trade credit with a given increases in puchases.

d. no change in trade credit with a given decrease in purchases.

e. an increase in trade credit with a given decrease in purchases.

2. Which of the following is the most likely to result in a positive cash flow to creditors?

a. Borrowing more money b. issuing shares of stock c. Purchasing fixed assets with cash. d. Paying off existing debt e. investing for the future