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:

Constructive Delivery

A symbolic delivery that confers the right to take possession of property that cannot be physically delivered.

Exclusive Possession

The right of a tenant or lessee to use and control a property without interference from the landlord or lessor.

Bailed Property

Items in the possession of someone who is not their owner, under a temporary agreement, awaiting its return or fulfillment of a condition.

Property

Refers to anything that is owned by a person or entity, including tangible and intangible goods.