Which of the following is NOT a situation that might lead a firm to increase its holdings of short-term marketable securities?
Answer
1. The firm must make a known future payment, such as paying for a new plant that is under construction.
2. The firm is going from its peak sales season to its slack season, so its receivables and inventories will experience a seasonal decline.
3. The firm is going from its slack season to its peak sales season, so its receivables and inventories will experience seasonal increases.
4. The firm has just sold long-term securities and has not yet invested the proceeds in operating assets.
5. The firm just won a product liability suit one of its customers had brought against it.