Ski Lifts Inc

question 105

Multiple Choice

Ski Lifts Inc.is a highly seasonal business.The following summary balance sheet provides data for peak and off-peak seasons (in thousands of dollars) : From this data, we may conclude that

• A) Ski Lifts has a working capital financing policy of exactly matching asset and liability maturities.
• B) Ski Lifts' working capital financing policy is relatively aggressive; that is, the company finances some of its permanent assets with short-term discretionary debt.
• C) Ski Lifts follows a relatively conservative approach to working capital financing; that is, some of its short-term needs are met by permanent capital.
• D) Without income statement data, we cannot determine the aggressiveness or conservatism of the company's working capital policy.
• E) Both a and c are correct.

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Definitions:

Marginal Product

The increase in output that occurs when one more unit of a certain input is added, with all other inputs remaining the same.

Profit Maximization

The process or strategy used by businesses to determine the price and output level that leads to the highest profit.

Demand Curve

A graphical representation that shows the relationship between the price of a good or service and the quantity demanded for it over a given period of time.

Marginal Product

Marginal product refers to the additional output produced as a result of adding one more unit of a specific input, while holding other inputs constant.