1. Managers may use the choice of new debt equity to _____ to investors their changes in expectations about future prospects.
A. show agency costs
B. signal
C. illustrate financial slack
D. jump and shake
E. the degree of market discipline
2. Caterpillar’s December 31st, 2015 balance sheet shows accounts receivable of approximately $9 billion, accounts payable of approximately $4.5 billion, and an inventory of approximately $5 billion. Their 2015 income statement shows Cost of Good Sold (COGS) of approximately $20 billion, sales of approximately $27 billion, and operating costs of approximately $22.5 billion. How long, on average, are Caterpillar’s payments outstanding? Assume a year has 360 days. Please provide a process flows diagram as well.
A) 72 days
B) 120 days
C) 90 days
D) 4 times per year