Which of the Following Current Asset Financing Policies Reflects the Firm

question 107

Multiple Choice

Which of the following current asset financing policies reflects the firm financing the seasonally-adjusted average level of asset demand with long-term debt and equity enabling it to use both short-term financing and short-term investing as needed?

• A) Flexible financing policy
• B) Restrictive financing policy
• C) Compromise financing policy
• D) Alternative financing policy

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Definitions:

Budget Variance

The difference between the actual fixed overhead costs and the budgeted fixed overhead costs for the period.

Applied

Refers to the process of allocating or assigning costs to a specific cost object in a manner that is consistent with the usage or benefits derived from it.

Denominator Activity Level

A term used in cost accounting to represent the total activity or volume that is used to allocate fixed costs to units of output.

Standard Cost System

A cost accounting system that uses cost units determined in advance for materials, labor, and overhead to estimate the cost of production.