Chester currently has $19,378 (000) in cash and management has decided to issue stocks and bonds worth an additional $8,000 (000). Assuming that cash from operations will be the same for each of the following activities, which activity exposes this company to the most risk of being issued an emergency loan?

a. Retiring the oldest bond

b. Purchasing $18,000 (000) worth of plant and equipment

c. A $5 dividend

d. Liquidate the entire inventory

Question

Furball

Business

15 March, 08:45

Chester currently has $19,378 (000) in cash and management has decided to issue stocks and bonds worth an additional $8,000 (000). Assuming that cash from operations will be the same for each of the following activities, which activity exposes this company to the most risk of being issued an emergency loan?

a. Retiring the oldest bond

b. Purchasing $18,000 (000) worth of plant and equipment

c. A $5 dividend

d. Liquidate the entire inventory

+2

Answers (1)

Know the Answer?

Walker Good · Answer 1

correct option is a. Retiring the oldest bond

Explanation:

given data

currently cash = $19,378 (000)

issue stocks and bonds = $8,000 (000)

to find out

which activity exposes to the most risk of being issued an emergency loan

solution

we know that here generally firm issue bonds to rise funds and bonds is debt for company

firm pay dividend on bond and firm have ability to pay dividend for reflect financial position but when any shortage in cash that time it leads to short term emergency loans

entire inventory liquidating will lead additional cash so that no need of loan and any item and equipment is company choice that is not compulsion so no need emergency loans

so we can say that here correct option is a. Retiring the oldest bond expose company to most risk being issue emergency loan