Jackson Plumbing,a Medium-Sized Company,wants to Guarantee That It Can Obtain

question 12

Multiple Choice

Jackson Plumbing,a medium-sized company,wants to guarantee that it can obtain short-term funds to meet unexpected future cash needs.Which of the following strategies would best meet the financing needs of Jackson Plumbing? Financial managers at Jackson Plumbing should:

• A)issue commercial paper as needed.
• B)request that the firm's board of directors approve an issue of additional shares of common stock.
• C)arrange for a revolving credit agreement with Jackson Plumbing's commercial bank.
• D)eliminate credit sales to improve their cash inflows and reduce the firm's investment in accounts receivable.

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Definitions:

Net Present Value

A financial analysis method used to determine the value of an investment by calculating the present value of its future cash flows.

Straight-Line Depreciation

An approach for assigning the financial outlay of a concrete asset throughout its service life in uniform annual segments.

Capital Budgeting

The process of allocating resources for significant capital, or investment, expenditures in the long term.

Discount Factor

A multiplier used in discounted cash flow (DCF) analysis to calculate the present value of future cash flows.