Which of the Following Statements Is CORRECT

question 82

Multiple Choice

Which of the following statements is CORRECT?

• A) Accruals are an expensive but commonly used way to finance working capital.
• B) A conservative financing policy is one where the firm finances part of its fixed assets with short-term capital and all of its net working capital with short-term funds.
• C) If a company receives trade credit under terms of 2/10, net 30, this implies that the company has 10 days of free trade credit.
• D) One cannot tell if a firm has a conservative, aggressive, or moderate current asset financing policy without an examination of its cash budget.
• E) If a firm has a relatively aggressive current asset financing policy vis-à-vis other firms in its industry, then its current ratio will probably be relatively high.
• Multiple Choice: Problems

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Definitions:

Aging Schedule

A compilation of accounts receivable by the age of each account.

Accounts Receivable

Funds that customers owe to a company for products or services already provided but not yet compensated for.

Credit Extension

The act of a lender increasing the amount of credit available to a borrower or the period over which repayment can be spread.