Which of the Following Statements Is INCORRECT

question 80

Multiple Choice

Which of the following statements is INCORRECT?

• A) Commercial paper can be issued by virtually any firm so long as it is willing to pay the going interest rate.
• B) Accruals are free in the sense that no explicit interest is paid on these funds.
• C) A conservative approach to working capital will result in all permanent assets being financed with long-term capital.
• D) The risk to the firm of borrowing with short-term credit is usually greater than with long- term debt. Added risk can stem from the greater variability of interest costs on short-term debt.

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Definitions:

Direct Expenses

Costs that can be directly attributed to the production of goods or services, such as raw materials and labor.

Transfer Price

The price at which divisions of a company transact with each other, often used for the sale of goods or services within the company.

Variable Cost

Costs that vary directly with the level of production or sales, such as raw materials and direct labor.

Ample Capacity

A situation where a company has enough or more than enough capacity to meet its current production or operation needs.