On November 1, 2009, Nova Company purchased short-term marketable equity securities in Sandi Corporation and Exeter Corporation. The following valuation of Nationals' portfolio in short-term investments on December 31, 2009 is:
Answer the following questions if you assume that only one of these short-term investments is to be classified as trading, while the other will be classified as available-for-sale.
A. If Nova Company wants to maximize its 2009 earnings per share, which investment should be classified as trading? Justify your choice.
B. If Nova Company desires to minimize its December 31, 2009, debt/equity ratio, which investment should be classified as trading? Justify your choice.
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