PRIN.OF CORPORATE FINANCE
PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Chapter 28, Problem 19PS

a.

Summary Introduction

To discuss: Whether inventory sold has any impact on the company’s current ratio.

b.

Summary Introduction

To discuss: Whether company acquired a bank loan to pay its providers is influence the company’s current ratio.

c.

Summary Introduction

To discuss: Whether company made arrangements in the line of credit influence the company’s current ratio.

d.

Summary Introduction

To discuss: Whether overdue bill paid by the clients influence the company’s current ratio.

e.

Summary Introduction

To discuss: Whether the use of cash to purchase extra inventories influence the current ratio of the company.

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Current Ratio:  Would the following events increase or decrease a firms ratio?  a. Inventory sold? b. A firm takes out a bank loan to pay its suuppliers? c. The firm arranges a line of credit that allows it to borrow at any time to pay its suppliers?
True or False Current Ratio is a measure used to assess the liquidity of the company, computed as current assets divided by current liabilities. * True O False Making sales using credit cards is a way a company can dispose its receivables.
I.                                                What are terms of credit? From the viewpoint of a short-tent creditor, why do lines of credit increase a company's liquidity? How arc the unused portions of these lines presented in financial statements? 2.                                                                                                                                     Why are investments in marketable securities shown separately from cash equivalents in the balance sheet?
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