Question

A firm creates value by: ? Multiple Choice paying more cash to its creditors and stockholders...

A firm creates value by: ?

Multiple Choice

paying more cash to its creditors and stockholders than the amount it received from them.

purchasing assets that create cash inflows equal to the cost of those assets.

borrowing long-term debt.

having a greater cash inflow from its stockholders than its outflow to them.

generating sales whether or not payment is received for all of those sales.

Homework Answers

Answer #1
A firm creates value by:
paying more cash to its creditors and stockholders than the amount it received from them.
The other options are incorrect.
2) purchasing assets that create cash inflows equal to the cost of those assets.
a company should have cash inflows generated by cash flow from operations
and those inflows are not related to the cost of the assets.
3) borrowing long-term debt.
this does not create value.
4) having a greater cash inflow from its stockholders than its outflow to them.
this does not create value.
5) generating sales whether or not payment is received for all of those sales.
this does not create value.
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