If the Total Long Term Financing of the Firm Is

question 28

Multiple Choice

If the total long term financing of the firm is greater than the total financing needs for part of the year and less than the needs for some of the year due to seasonal fluctuations, the company will most likely:

• A) hold excess cash.
• B) borrow short term and hold excess cash.
• C) hold excess cash and reduce business activities.
• D) invest in marketable securities and borrow short term.

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Definitions:

Common Fixed Expenses

Expenses that remain constant for a business across different projects, products, or divisions and do not change with the level of production or sales.

Segmented Income Statement

A financial statement that breaks down revenues, cost of goods sold, and expenses by different segments of a business, such as product lines or geographical areas.

Contribution Format

A financial reporting format that focuses on distinguishing between fixed and variable costs and calculating the contribution margin.

Common Fixed Expenses

Overhead costs shared by multiple business units or product lines, which are not attributable to any single unit or product.