The Length of Time That an Investor Keeps an Asset

question 10

Multiple Choice

The length of time that an investor keeps an asset is called:

• A)the retention period
• B)the holding period
• C)the maintenance period
• D)none of the answers listed is correct.

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Definitions:

Inventory Holding Period

Inventory holding period measures the average time a company holds inventory before selling it, reflecting the efficiency of inventory management and its impact on cash flow.

Payables Deferral Period

The average length of time between a firm’s purchase of materials and labor and the payment of cash for them. It is calculated by dividing accounts payable by credit purchases per day (cost of goods sold/365).

Line of Credit

A flexible loan arrangement with a financial institution that allows a borrower to draw upon funds up to a specified limit at their discretion.

Financial Strength

The ability of an entity to meet its financial obligations, often evaluated through metrics like liquidity ratios, solvency ratios, and profitability.