A Firm Constructing a New Manufacturing Plant and Financing It

question 29

True/False

A firm constructing a new manufacturing plant and financing it with short-term loans that are scheduled to be converted to first mortgage bonds when the plant is completed, would want to separate the construction loan from other current liabilities associated with working capital management.

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Definitions:

Verbal Evidence

Evidence presented in the form of words, spoken or written, as opposed to physical evidence or demonstrations, used in legal proceedings.

Statute of Frauds

A legal principle that requires certain types of contracts to be in writing in order to be enforceable.

Illegal

Actions or conduct that the law forbids and for which there are punitive consequences.

Breach of Contract

The failure to fulfill the terms of a contract without lawful excuse.