Discretionary Financing Needs Implies

question 21

Multiple Choice

Discretionary financing needs implies

• A) that management may choose between various forms of debt and equity.
• B) that the purchases being financed are optional rather than necessary.
• C) that management has considerable discretion in how to dispose of retained earnings.
• D) that management may choose between debt, new equity or retained earnings.

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Definitions:

Future Cash Flows

Projections of cash revenues minus cash expenses, representing the amount of money a company expects to receive or pay out over a specific period.

Capital Lease

A lease agreement in which the lessee essentially buys an asset and pays for it over time, classifying the lease as a financial transaction in the balance sheet.

Operating Lease

A contract that allows for the use of an asset but does not convey rights of ownership of the asset.

Assets And Liabilities

Represent the resources a company owns or controls (assets) and the obligations it owes to outsiders (liabilities).