A Firm Faces a Liquidity Crunch and Must Decide Between

question 49

Multiple Choice

A firm faces a liquidity crunch and must decide between borrowing from a bank at 12% interest or stretching its payables for one quarter. If it stretches the payables it will forgo a 2% discount for timely payment. Based solely on cash flows, which would you suggest?

• A) Stretching saves the firm approximately 8% per year.
• B) Use the bank loan; forgoing a cash discount is costly.
• C) Stretch the payables and finance at a savings of approximately 3.75% annually.
• D)Use the bank loan because it represents simple interest.

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Community

A group of people living in the same place or having a particular characteristic in common, often providing a sense of belonging and support.

Whole Child

An educational approach focusing on nurturing all aspects of a child's development, including physical, emotional, social, and cognitive growth.

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Family-Centered Approach

An approach in various professional fields that emphasizes the importance of involving family members in decision-making, planning, and implementing services to strengthen and support the family unit.