1. Which one of the following is a use of cash?

I. decrease in notes payable

II. increase in inventory

III. increase in long-term debt

IV. decrease in accounts receivable

V. increase in common stock

2. Which of the following is NOT a likely financing policy for a rapidly growing business?

I. If external financing is necessary, use debt to the point it does not affect financial flexibility.

II. Maintain an aggressive leverage ratio to enjoy interest tax shields and inject additional discipline in respect to management incentives.

III. Borrow funds rather than limit growth, thereby limiting growth only as a last resort.

IV. Adopt a modest dividend payout policy that enables the company to finance most of its growth internally.

I only

II and III only

I, II and III

II only

III only