Which one of the following transactions will increase the liquidity of a firm?
A)using cash to purchase new equipment
B)increasing short-term debt while decreasing long-term debt by an equivalent amount
C)issuing long-term debt to repurchase shares of outstanding stock
D)increasing the sales on credit while reducing cash sales by the same amount
E)selling inventory on credit

Question

Quizplus · Accepted Answer

Selling inventory on credit will increase the firm's accounts receivable, which is a short-term asset that can be easily converted into cash, thereby increasing liquidity.

Which One of the Following Transactions Will Increase the Liquidity