Which of the Following Statements Is CORRECT

question 125

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.

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Definitions:

Net Capital Outflow

The difference between the domestic country's purchases of foreign assets and foreign purchases of the domestic country’s assets for a certain period.

Domestic Investment

Financial investments within a country's borders, including purchases of property, plants, and equipment.

Government Deficit

A scenario in which a government spends more than it earns over a certain timeframe, usually resulting in the need to borrow funds.

Government Budget Deficit

A financial situation where a government's expenditures exceed its revenues in a given fiscal period, leading to borrowing or debt accumulation.