OrangeRhino3007 asked Other things held constant, which of the following will cause an increase in net working capital? Answer Cash is used to buy marketable securities. A cash dividend is declared and paid. Merchandise is sold at a profit, but the sale is on credit. Long-term bonds are retired with the proceeds of a preferred stock issue. Missing inventory is written off against retained earnings. .2 points Question 2 Which of the following is NOT a situation that might lead a firm to increase its holdings of short-term marketable securities? Answer The firm must make a known future payment, such as paying for a new plant that is under construction. The firm is going from its peak sales season to its slack season, so its receivables and inventories will experience a seasonal decline. The firm is going from its slack season to its peak sales season, so its receivables and inventories will experience seasonal increases. The firm has just sold long-term securities and has not yet invested the proceeds in operating assets. The firm just won a product liability suit one of its customers had brought against it. .2 points Question 3 Which of the following items should a company report directly in its monthly cash budget? Answer Its monthly depreciation expense. Cash proceeds from selling one of its divisions. Accrued interest on zero coupon bonds that it issued. New shares issued in a stock split. New shares issued in a stock dividend. .2 points Question 4 A lockbox plan is Answer used to protect cash, i.e., to keep it from being stolen. used to identify inventory safety stocks. used to slow down the collection of checks our firm writes. used to speed up the collection of checks received. used primarily by firms where currency is used frequently in transactions, such as fast food restaurants, and less frequently by firms that receive payments as checks. .2 points Question 5 Which of the following statements is CORRECT? Answer Accruals are an expensive but commonly used way to finance working capital. A conservative financing policy is one where the firm finances part of its fixed assets with short-term capital and all of its net working capital with short-term funds. If a company receives trade credit under terms of 2/10 net 30, this implies that the company has 10 days of free trade credit. One cannot tell if a firm has a conservative, aggressive, or moderate current asset financing policy without an examination of its cash budget. If a firm has a relatively aggressive current asset financing policy vis