A company that increases its liquidity by holding more cash and marketable securities is
A) likely to achieve a higher return on equity because of higher interest income.
B) going to have to sell common stock to raise the cash to become more liquid.
C) going to maximize firm value because risk is decreased.
D) likely to achieve a lower return on equity because of the smaller rates of return earned on cash
and marketable securities compared to the firm's other investments.
Question 2
Discretionary financing needed (DFN) is equal to projected total assets minus projected total
liabilities minus projected owners' equity.
Indicate whether the statement is true or false
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