1. Select the choice below that will make the quick ratio go up:

a. Sell inventory and use the proceeds to increase the DSO. b. Issue more shares and use the proceeds to increase inventories. c. Reduce DSO and keep the proceeds in the cash account. d. Use some cash to purchase additional inventories. e. Issue more shares and use the proceeds to acquire additional fixed assets.

2. Firm XYZ will issue more shares and use the proceeds to lower its debt. Suppose that this does not change operating income, interest rates, tax rates, or total assets. Which statement is most true?

a.The ROA will decrease. b. The EBIT will increase. c. Taxable income will decline. d. The tax bill will increase. e. Net income will decrease.

3. On its 12/31/15 balance sheet, NashuaInc. showed $333 million of retained earnings, which was also the amount shown in the 12/31/14 balance sheet. Which statement is most true?

a. Nashua Inc. must have had zero net income during 2015. b. Nashua had negative net income during 2015 and it paid dividends. c. Nashua could have had positive earnings during 2015, but it paid all of it out as dividends. d. The company must have paid out half of its 2015 earnings as dividends. e. The company must have paid no dividends in 2015.