You Are Headed to the Mountains for Some Climbing This

question 62

Multiple Choice

You are headed to the mountains for some climbing this summer and you need some gear.The local mountaineering shop is offering 6% financing on all purchases before the end of the month.Your savings account is currently paying 5%,and you are in a marginal tax bracket of 28%.Which of the following is true?

• A)Borrow from the mountain shop - it is cheaper.
• B)Take the money out of savings - it is cheaper.
• C)It does not matter where you get the money;it will cost the same.
• D)You should seek competent financial help.
• E)None of the above are true.

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Definitions:

Sales Revenue

The income received by a company from its sales of goods or services before any expenses are deducted.

Working Capital

The measure of a company's short-term liquidity, determined by subtracting current liabilities from current assets.

Short-Run Liquidity

The ability of a company to meet its short-term financial obligations and operate in the near future without facing financial distress.

Current Assets

Assets that are expected to be converted into cash, sold, or consumed within one year or within the normal operating cycle of the business.