Holding everything else constant,an increase in cash ________ the firm's net debt.
A)will decrease
B)will have no impact on
C)will increase
D)may increase or decrease
E)will not change

Question

Quizplus · Accepted Answer

When a firm increases its cash, it means it has more liquid assets than before. Since cash is also a component of the firm's total debt, an increase in cash will decrease the net debt of the firm. Therefore, the correct answer is (A) will decrease.

Holding Everything Else Constant,an Increase in Cash ________ the Firm's