1) Which of the following would NOT affect the current ratio?
a. Borrow long term fundsto finance additional property, plant and equipment.
b. Issue long-term debt to buy inventory.
c. Issue ordinary shares to reduce current liabilities.
d. Sell property, plant and equipment to reduce accounts payable.
e. Increasing accounts payable through additional credit purchases.
2) Companies may adopt an aggressive or a conservative working capital policy. An aggressive policy means that a company:
a. holds high levels of cash and inventories (current assets).
b. has a low level of flexibility.
c. expects a lower level of profitability.
d. faces a low level of risk.
e. has large investments in property, plant and equipment.
3) Financial managers evaluating decision alternatives or potential actions must consider:
a. only risk.
b. only return.
c. both risk and return.
d. risk, return, and the impact on share price.
e. the impact on the local stakeholders.
4) The primary concern of creditors when assessing the strength of a firm is the firm's:
c. short-term liquidity.
d. share price.
e. dividend policy.
5) The key variables in the ‘owner wealth maximization process’ are:
a. earnings per share and risk.
b. cash flows and risk.
c. earnings per share and share price.
d. profits and risk.
e. none of the above.