Whether selling of new equity shares and use those proceeds to buy a new plant site will actually achieve the objective of improving liquidity of the company.

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Answer 1

Question

Chapter 3, Problem 21P

a)

Summary Introduction

To discuss: Whether selling of new equity shares and use those proceeds to buy a new plant site will actually achieve the objective of improving liquidity of the company.

b)

Summary Introduction

To discuss: Whether using marketable securities and cash to pay-off accounts receivables and bank borrowings will actually achieve the objective of improving liquidity of the company.

c)

Summary Introduction

To discuss: Whether borrowing long-term debt and use those proceeds to pay off short-term debt will actually achieve the objective of improving liquidity of the company.

d)

Summary Introduction

To discuss: Whether selling the surplus fixed assets and use those proceeds to marketable securities will actually achieve the objective of improving liquidity of the company.

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Armbrust Corporation is the maker of fine fitness equipment. Armbrust's bank has been pressuring the firm to improve its liquidity. Which of the following actions proposed by the CFO do you believe will actually achieve this objective? a. Sell new equity and use the proceeds to purchase a new plant site. -Select- b. Use cash and marketable securities to pay off short-term bank borrowings and accounts payable. -Select- v c. Borrow long-term and use the proceeds to pay off short-term debt. -Select- v d. Sell surplus fixed assets and invest the proceeds in marketable securities. -Select- V

Indicate how you would expect the following strategies to affect the company’s net cash flows from operating activities (1) in the near future and (2) in later periods (after the strategy’s long-term effects have “taken hold”). Fully explain your reasoning. a. A successful pharmaceutical company substantially reduces its expenditures for research anddevelopment.b. A restaurant that previously sold only for cash adopts a policy of accepting bank credit cards,such as Visa and MasterCard.c. A manufacturing company reduces by 50 percent the size of its inventories of raw materials(assume no change in inventory storage costs).d. Through tax planning, a rapidly growing real estate developer is able to defer significantamounts of income taxes.e. A rapidly growing software company announces that it will stop paying cash dividends for theforeseeable future and will instead distribute stock dividends.

As a bank manager, you conclude that the bank has a capital shortfall and should decrease the equity multiplier (i.e., increase the capital ratio) to prevent bank failure. Which of the following is one of things you can do to manage capital adequacy of the bank? a.Acquiring more reserves through borrowing from fed funds loansb.Selling the bank's holding of mortgage-backed securities and using the proceeds to decrease liabilitiesc.Repurchasing shares of the bankd.Increasing dividend payout ratio to reduce retained earnings.

Answer 2

Question

Chapter 3, Problem 21P

a)

Summary Introduction

To discuss: Whether selling of new equity shares and use those proceeds to buy a new plant site will actually achieve the objective of improving liquidity of the company.

b)

Summary Introduction

To discuss: Whether using marketable securities and cash to pay-off accounts receivables and bank borrowings will actually achieve the objective of improving liquidity of the company.

c)

Summary Introduction

To discuss: Whether borrowing long-term debt and use those proceeds to pay off short-term debt will actually achieve the objective of improving liquidity of the company.

d)

Summary Introduction

To discuss: Whether selling the surplus fixed assets and use those proceeds to marketable securities will actually achieve the objective of improving liquidity of the company.

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Answer 3

Question

Chapter 3, Problem 21P

a)

Summary Introduction

To discuss: Whether selling of new equity shares and use those proceeds to buy a new plant site will actually achieve the objective of improving liquidity of the company.

b)

Summary Introduction

To discuss: Whether using marketable securities and cash to pay-off accounts receivables and bank borrowings will actually achieve the objective of improving liquidity of the company.

c)

Summary Introduction

To discuss: Whether borrowing long-term debt and use those proceeds to pay off short-term debt will actually achieve the objective of improving liquidity of the company.

d)

Summary Introduction

To discuss: Whether selling the surplus fixed assets and use those proceeds to marketable securities will actually achieve the objective of improving liquidity of the company.

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Answer 4

Question

Chapter 3, Problem 21P

a)

Summary Introduction

To discuss: Whether selling of new equity shares and use those proceeds to buy a new plant site will actually achieve the objective of improving liquidity of the company.

b)

Summary Introduction

To discuss: Whether using marketable securities and cash to pay-off accounts receivables and bank borrowings will actually achieve the objective of improving liquidity of the company.

c)

Summary Introduction

To discuss: Whether borrowing long-term debt and use those proceeds to pay off short-term debt will actually achieve the objective of improving liquidity of the company.

d)

Summary Introduction

To discuss: Whether selling the surplus fixed assets and use those proceeds to marketable securities will actually achieve the objective of improving liquidity of the company.

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Answer 5

Chapter 3, Problem 21P

a)

Summary Introduction

To discuss: Whether selling of new equity shares and use those proceeds to buy a new plant site will actually achieve the objective of improving liquidity of the company.

b)

Summary Introduction

To discuss: Whether using marketable securities and cash to pay-off accounts receivables and bank borrowings will actually achieve the objective of improving liquidity of the company.

c)

Summary Introduction

To discuss: Whether borrowing long-term debt and use those proceeds to pay off short-term debt will actually achieve the objective of improving liquidity of the company.

d)

Summary Introduction

To discuss: Whether selling the surplus fixed assets and use those proceeds to marketable securities will actually achieve the objective of improving liquidity of the company.

Answer 6

Chapter 3, Problem 21P

a)

Summary Introduction

To discuss: Whether selling of new equity shares and use those proceeds to buy a new plant site will actually achieve the objective of improving liquidity of the company.

Answer 7

Chapter 3, Problem 21P

a)

Summary Introduction

To discuss: Whether selling of new equity shares and use those proceeds to buy a new plant site will actually achieve the objective of improving liquidity of the company.

Answer 8

b)

Summary Introduction

To discuss: Whether using marketable securities and cash to pay-off accounts receivables and bank borrowings will actually achieve the objective of improving liquidity of the company.

Answer 9

b)

Summary Introduction

To discuss: Whether using marketable securities and cash to pay-off accounts receivables and bank borrowings will actually achieve the objective of improving liquidity of the company.

Answer 10

c)

Summary Introduction

To discuss: Whether borrowing long-term debt and use those proceeds to pay off short-term debt will actually achieve the objective of improving liquidity of the company.

Answer 11

c)

Summary Introduction

To discuss: Whether borrowing long-term debt and use those proceeds to pay off short-term debt will actually achieve the objective of improving liquidity of the company.

Answer 12

d)

Summary Introduction

To discuss: Whether selling the surplus fixed assets and use those proceeds to marketable securities will actually achieve the objective of improving liquidity of the company.

Answer 13

d)

Summary Introduction

To discuss: Whether selling the surplus fixed assets and use those proceeds to marketable securities will actually achieve the objective of improving liquidity of the company.

Answer 14

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Answer 15

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Answer 16

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Answer 17

Ch. 3 - Prob. 1QTD Ch. 3 - Prob. 2QTD Ch. 3 - Prob. 3QTD Ch. 3 - Prob. 4QTD Ch. 3 - Prob. 5QTD Ch. 3 - Prob. 6QTD Ch. 3 - Prob. 7QTD Ch. 3 - Prob. 8QTD Ch. 3 - Prob. 9QTD Ch. 3 - Prob. 10QTD

Whether selling of new equity shares and use those proceeds to buy a new plant site will actually achieve the objective of improving liquidity of the company.

Solution Summary: The author explains that selling new equity shares and using those proceeds to buy a new plant site does not have an improvement in liquidity of the company.

To discuss: Whether selling of new equity shares and use those proceeds to buy a new plant site will actually achieve the objective of improving liquidity of the company.

To discuss: Whether using marketable securities and cash to pay-off accounts receivables and bank borrowings will actually achieve the objective of improving liquidity of the company.

To discuss: Whether borrowing long-term debt and use those proceeds to pay off short-term debt will actually achieve the objective of improving liquidity of the company.

To discuss: Whether selling the surplus fixed assets and use those proceeds to marketable securities will actually achieve the objective of improving liquidity of the company.

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Chapter 3 Solutions