$0\mathrm{.}6$ points

This question deals with "off balance sheet financing." Company A normally finances buying its inventory by borrowing on a bank line of credit. The bank has a security interest in the inventory. It is considering entering into an agreement with a financing institution under which Company A will formally sell its inventory to that institution for cash now, and agrees to buy the inventory back later $($when the time comes to sell it to customers$)$ for a higher price. If Company $A$ is allowed to treat this inventory financing arrangement as a sale, rather than a borrowing, how will this affect its reported results?

$$ Its ratio of debt to equity will be lower

Its cash will be higher

Its fixed asset turnover will be higher

Its working capital will be lower