Which of the Following Statements Best Describes Alternatives to Short-Term

question 45

Multiple Choice

Which of the following statements best describes alternatives to short-term financing policies?

• A)Accruals are an expensive way to finance working capital.
• B)A conservative financing policy is one in which the firm finances all of its fixed assets with long-term capital and part of its permanent net operating working capital with short-term, nonspontaneous credit.
• C)If a company receives trade credit under terms 2/10, net 30, this implies the company has 10 days of free trade credit.
• D)A firm following an aggressive financing policy would finance all its permanent NOWC with long-term capital.

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Definitions:

Invisible Hand

A term coined by Adam Smith to describe the self-regulating nature of the marketplace where individuals pursuing their own self-interest lead to the benefit of society at large.

Comparative Advantage

The ability of a country, individual, company, or region to produce a good or service at a lower opportunity cost than its competitors.

Self-Interest

The pursuit of personal advantage and well-being, often driving economic decisions and behaviors.

Expansionary Fiscal Policy

A government policy aimed at stimulating economic growth by increasing public spending, cutting taxes, or both, to boost aggregate demand.