Why Does a Business Firm Require Long-Term Sources of Funds

question 22

Multiple Choice

Why does a business firm require long-term sources of funds?

• A) To finance long-term expenditures for fixed assets
• B) A long-term source of funds replaces the need for insurance
• C) To obtain funds for purchasing inventories
• D) To eliminate the need for frequently seeking short-term financing
• E) To finance annual bonus payments for employees

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Definitions:

Downward Sloping

Refers to a graph line that shows a decrease in price leading to an increase in demand, commonly illustrated in supply and demand curves.

Economic Profits

Profit or loss calculated by subtracting total costs, including opportunity costs, from total revenues to determine overall effectiveness.

Average Rate

The mean quantity or figure computed by dividing the sum of all measured quantities by the number of quantities.

Above Average Profits

Earnings that exceed the norm for a particular industry or sector, often resulting from competitive advantages or efficient operations.