Which of the Following Statements Is CORRECT

question 129

Multiple Choice

Which of the following statements is CORRECT?

• A) Although short-term interest rates have historically averaged less than long-term rates, the heavy use of short-term debt is considered to be an aggressive strategy because of the inherent risks associated with using short-term financing.
• B) If a company follows a policy of "matching maturities," this means that it matches its use of common stock with its use of long-term debt as opposed to short-term debt.
• C) Net working capital is defined as current assets minus the sum of payables and accruals, and any decrease in the current ratio automatically indicates that net working capital has decreased.
• D) If a company follows a policy of "matching maturities," this means that it matches its use of short-term debt with its use of long-term debt.
• E) Net working capital is defined as current assets minus the sum of payables and accruals, and any increase in the current ratio automatically indicates that net working capital has increased.

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Definitions:

Horizontal Equity

is a principle in taxation that mandates taxpayers with similar income or assets should be taxed at the same rate.

Tax Burdens

Tax burdens refer to the economic impact of taxes on individuals or corporations, often measured as a percentage of income or profits.

Ability to Pay

The principle suggesting that taxes should be levied according to an individual's or entity's capacity to pay, typically related to income or wealth levels.

Progressive Income Tax

A tax system where the tax rate increases as the taxable income increases, aimed at redistributing income more equitably.