8. Which one of the following statements is NOT true? A) Retained profits represent a free source of funds. B) The issuing of shares to raise finance can be expensive. C) Retained Earnings represents a very good external source of finance. D) Borrowing can increase the risk that a company faces. 9. Porbandar pic is considering the investment in a project that has an initial cash outlay followed by a series of net cash inflows. The business applied the NPV and IRR methods to evaluate the proposal but, after the evaluation had been undertaken, it was found that the correct cost of capital figure was lower than that used in the evaluation. What will be the effect of correcting for this error on the NPV and IRR figures? Effect on NPV Effect on IRR Decrease No Change No Change Increase A B D Decrease Decrease Increase Increase 10. Which of the following statements most accurately describes the quick (acid-test) ratio? A) An assessment of short-term liquidity, which compares receivables and cash to current liabilities, without taking into account the inventories. B) An assessment of long-term solvency, which compares total assets to total liabilities. C) An assessment of short-term liquidity that compares inventory, receivables and cash to current liabilities. D) An assessment of long-term solvency, which compares short and long-term borrowings to total equity