Looking forward to next year, if Digby’s current cash balance is $17,334 (000) a

Question

Looking forward to next year, if Digby’s current cash balance is $17,334 (000) and cash flows from operations next period are unchanged from this period, and Digby takes ONLY the following actions relating to cash flows from investing and financing activities: Issues 100 (000) shares of stock at the current stock price Issues $400 (000) in bonds Retires $10,000 (000) in debt Which of the following activities will expose Digby to the most risk of needing an emergency loan?  

Select: 1 Purchases assets at a cost of $25,000 (000) Liquidates the entire inventory Sells $10,000 (000) of their long-term assets Pays a $5.00 per share dividend

Explanation / Answer

Since Digby has not taken any financing transaction in order to finance its long-term capital funding of assets, it may happen that if it needs a lot funds for purchasing fixed assets, then this might become riskier for it.

The last option seems most correct as it requires large funding.

Hence correct option is Purchases assets at a cost of $25,000 (000)

Related Questions

Navigate

• Browse (All)
• Browse L
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.