Because the Use of Short-Term Debt to Finance Fixed Assets

question 82

True/False

Because the use of short-term debt to finance fixed assets is a working capital decision variable in the current period,it does not need to be taken into account when managers assess the firm's ability to meet its current obligations using expected cash inflows.

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Definitions:

Sustainable Growth Rate

The maximum rate at which a company can grow its sales, earnings, and dividends without increasing debt or equity financing.

Debt Ratio

A financial ratio that measures the extent of a company's or individual's leverage, calculated by dividing total liabilities by total assets.

Selling And Administrative Expenses

Combined costs related to the selling of products and the administration of a business, excluding production costs.

Retention Ratio

The proportion of net income that is retained in the business rather than paid out to shareholders as dividends, indicating the amount reinvested in the company.