A Firm Which Uses the Aggressive Financing Strategy Plans to Purchase

question 149

Multiple Choice

A firm which uses the aggressive financing strategy plans to purchase raw materials in large quantities to take price discounts. The firm will finance the purchase with a loan. The most likely consequence of this action is

• A) a decrease in the current ratio.
• B) an increase in net working capital.
• C) an undetermined change in the current ratio.
• D) an increase in long-term debt.

---

Definitions:

Discontinuance

The action of stopping the production or sale of a product or service, often as a result of strategic business decisions.

Fixed Costs

Costs that tend to remain the same in amount, regardless of variations in the level of activity.

Differential Cost

The difference in total cost that will result from selecting one alternative over another in a decision-making situation.

Differential Cost

The difference in total cost that will result from selecting one choice over another.