A Firm That Follows an Aggressive Working Capital Financing Approach

question 93

True/False

A firm that follows an aggressive working capital financing approach uses primarily short-term credit and thus is more exposed to an unexpected increase in interest rates than is a firm that uses long-term capital and thus follows a conservative financing policy.

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Definitions:

Cost-plus Pricing

A pricing strategy where the selling price is determined by adding a specific markup to a product's cost to ensure profit.

Standard Markup Pricing

A pricing method where a constant percentage markup is applied to the cost of a product to set its sale price.

Standard Markup Pricing

A common pricing strategy where a predetermined percentage is added to a product's cost to establish its retail price.

Overhead Costs

Expenses that are not directly tied to the production of goods or services but are required for the business's operation, such as rent, utilities, and salaries.