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:

Accounts Receivable

Unpaid amounts by customers for goods or services already supplied by a company.

Write Off

The accounting action of declaring that an asset is partially or totally worthless, reducing its value to zero in the books.

Contra-Revenue Account

An account that is used to record reductions in gross revenue, such as sales returns, allowances, and discounts.

Allowance Method

An accounting technique used to account for bad debts by estimating uncollectible accounts at the end of each period.