Holding everything else constant, an increase in cash ________ a firm's net debt.
A) will decrease
B) will have no impact on
C) will increase
D) may increase or decrease

Question

Quizplus · Accepted Answer

Cash is a component of a firm's assets, and net debt is calculated by subtracting a firm's total debt from its total assets. If cash increases, then total assets increase, but total debt remains the same. As a result, net debt will decrease.

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