Which of the Following Statements Is FALSE

question 27

Multiple Choice

Which of the following statements is FALSE?

• A)The matching principle indicates that the firm should finance permanent working capital with short-term sources of funds.
• B)Following the matching principle should,in the long run,help minimize a firm's transaction costs.
• C)In a perfect capital market,the choice of financing is irrelevant;thus,how the firm chooses to finance its short-term cash needs cannot affect value.
• D)A portion of a firm's investment in its accounts receivable and inventory is temporary and results from seasonal fluctuations in the firm's business or unanticipated shocks.

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Definitions:

Periodic System

An accounting method where inventory updates are made on a periodic basis, usually at the end of a reporting period, rather than after each transaction.

Ending Inventory

The value of goods available for sale at the end of an accounting period, calculated as beginning inventory plus purchases less cost of goods sold.

Overstated Inventory

A situation where the recorded amount of inventory is higher than the actual inventory available, often due to error or mismanagement.

Stockholders' Equity

The residual interest in the assets of a corporation after deducting its liabilities, often referred to as shareholders' equity or owners' equity.