1) Consider two scenarios for a firm that wants to buy additional inventory. In the first scenario, the firm uses cash to pay for the inventory, while in the second scenario the firm incurs a new account payable (buying the inventory on credit). Which of the following will be true about the current ratio in these two scenarios?

The current ratio will be the same in the two scenarios

The current ratio in scenario two will be greater

The current ratio in scenario one will be greater

2) If a firms WACC increases by 5% and no other variables at the firm change over the same period of time, what is the effect on its ROE?

Unchanged

Decreases 5%

Increases 5%

3) Which of the following factors is most likely to imply a firm will continue to hold a stable market share in its industry?

Low barriers to entry

Slow pace of product innovation

Low switching costs