A Firm That Follows an Aggressive Working Capital Financing Approach

question 93

True/False

A firm that follows an aggressive working capital financing approach uses primarily short-term credit and thus is more exposed to an unexpected increase in interest rates than is a firm that uses long-term capital and thus follows a conservative financing policy.

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Definitions:

Markup Rate

The percentage increase in price applied to the cost price of a product to determine its selling price.

Tourist Shop

A store that specializes in selling souvenirs and merchandise aimed at tourists.

Markup

The amount by which the cost of a product is increased to arrive at its selling price.

Selling Price

The amount of money for which an item or service is sold to a customer.