Transcribed Image Text
2. Which of the following statements is FALSE? a. A portion of afirm's investment in its accounts receivable and inventory istemporary and results from seasonal fluctuations in the firm'sbusiness or unanticipated shocks. b. In a perfect capital market,the choice of financing is irrelevant; thus how the firm chooses tofinance its short-term cash needs cannot affect value. c. Thematching principle indicates that the firm should finance permanentworking capital with short-term sources of funds. d. Following thematching principle should, in the long run, help minimize a firm'stransaction costs.22. Which of the following would decrease a firm's cashconversion cycle? a. Increase the accounts receivable days b.Increase the accounts payable days c. Increase the cash days d.Increase the inventory days31. MTN Enterprises, LTD. had sales of $154 million this yearand an average accounts receivable of $18 million per day. Itscredit terms specify “2/14 net 40.” Based on this information, howlong does it take MTN to collect on its sales (on average)? a. 8.5days b. 28 days c. 43 days d. 13 days