Question

A firm wants to strengthen its financial position. Which of the following actions would increase its current ratio?

A. Use cash to repurchase some of the company's own stock.
B. Use cash to increase inventory holdings.
C. Borrow using short-term debt and use the proceeds to repay debt that has a maturity of more than one year.
D. Issue new stock and then use some of the proceeds to purchase additional inventory and hold the remainder as cash.
E. Reduce the company's days' sales outstanding to the industry average and use the resulting cash savings to purchase plant and equipment.

Answer 1

Answer:

D. Issue new stock and then use some of the proceeds to purchase additional inventory and hold the remainder as cash.

Explanation:

A company can strengthen it's financial position by issuance of new stock and then use some of the proceeds to purchase additional inventory and hold the remainder as cash