All of the following will improve a firm's liquidity position EXCEPT
A) increase accounts receivable turnover.
B) increase inventory turnover.
C) increase the average collection period.
D) increase long-term debt and invest the money in marketable securities.

Question

Quizplus · Accepted Answer

Option C is the only one that will not improve a firm's liquidity position. Increasing the average collection period means that the firm is taking longer to collect its accounts receivable, which can result in cash flow problems and decrease the firm's liquidity position. All other options (increasing accounts receivable turnover, increasing inventory turnover, and investing in marketable securities) would enhance the firm's liquidity position. Option D may depend on the interest rate of the long-term debt and the return on the marketable securities, but in general, it would increase the liquidity position.

All of the Following Will Improve a Firm's Liquidity Position