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

Fanning company is considering the addition of a new product to its cosmetics line. the company has three distinctly different options: a skin cream, a bath oil, or a hair coloring gel. relevant information and budgeted annual income statements for each of the products follow. skin cream bath oil color gel budgeted sales in units (a) 110,000 190,000 70,000 expected sales price (b) $8 $4 $11 variable costs per unit (c) $2 $2 $7 income statements sales revenue (a × b) $880,000 $760,000 $770,000 variable costs (a × c) (220,000) (380,000) (490,000) contribution margin 660,000 380,000 280,000 fixed costs (432,000) (240,000) (76,000) net income $228,000 $140,000 $204,000 required: (a) determine the margin of safety as a percentage for each product. (b) prepare revised income statements for each product, assuming a 20 percent increase in the budgeted sales volume. (c) for each product, determine the percentage change in net income that results from the 20 percent increase in sales. (d) assuming that management is pessimistic and risk averse, which product should the company add to its cosmetics line? (e) assuming that management is optimistic and risk aggressive, which product should the company add to its cosmetics line?