$\text { Flum Packages, Inc. }$ The Company Earns 5 Percent on Current Assets and 15

Multiple Choice

$\text { Flum Packages, Inc. }$

$\begin{array}{lrlr}\text { Assets }&&\text { Liabilities \& Equity }\\\hline\text { Current assets } & \$ 10,000 & \text { Current Liabilities } & \$ 5,000 \\\text { Fixed assets } & 20,000 & \text { Long-term debt } & 12,000 \\& & \text { Equity } & 13,000\\&---&&---\\\text { Total }&\$30,000&\text { Total }&\$30,000\end{array}$
The company earns 5 percent on current assets and 15 percent on fixed assets. The firm's current liabilities cost 7 percent to maintain and the average annual cost of long-term funds is 20 percent.
-If the firm was to shift $7,000 of fixed assets to current assets, the firm's net working capital would__________, the annual profits on total assets would__________and the risk of not being able to meet current obligations would__________, respectively

A) decrease; increase; decrease
B) increase; decrease; decrease
C) increase; decrease; increase
D) decrease; increase; increase