FIN 534 Chapter 3 Solutions

1.

b. Offer price reductions along with generous credit terms that would (1) enable the firm to sell some of its excess inventory and (2) lead to an increase in accounts receivable.

Reasoning: Quick ratio will improve when inventory decreases and accounts receivable increases.

2.

c. Borrow using short-term notes payable and use the proceeds to reduce long-term debt.

Reasoning: Current ratio Current assets/Current liabilities

Borrowing using short-term notes payable would increase the current liabilities without affecting the current assets and this would reduce the current ratio.

a. If a firm increases its sales while holding the accounts receivable constant, then, other things held constant, its days' sales outstanding will decline.

Reasoning:

Days'...