​The Matching Principle Suggests That

question 27

Multiple Choice

​The matching principle suggests that
1) equipment should be financed with long-term sources
2) current assets may be financed with short-term sources
3) plant should not be financed with short-term sources

• A)​1 and 2
• B)​1 and 3
• C)​2 and 3
• D)​1, 2, and 3

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Definitions:

Net Income

The residual income of a company after all operational costs and taxes have been taken out of its revenue.

Comparative Financial Statement

Financial reports that present a company’s financial performance across different periods, allowing for comparison and analysis of trends.

Solvency

The ability of an entity to meet its long-term financial obligations and continue its operations into the foreseeable future.

Liquidity

The ease with which an asset or an investment can be converted into cash without significantly affecting its price.