Tidewater Distributors Is Successfully Using Short-Term Financing to Buy Inventory

question 64

Multiple Choice

Tidewater Distributors is successfully using short-term financing to buy inventory for resale. As sales climb, the managers realize that they must decide what to do with the money. Since you are the financial manager, they ask for your advice. You advise them to first

• A) repay the short-term obligations out of the sales revenue.
• B) use the money to buy a yacht for the managers.
• C) increase all employees' wages.
• D) enroll all the salespeople in a sales training course.
• E) borrow more money.

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Definitions:

Nominal Risk-Free Return

The return on an investment with zero risk in nominal terms, not adjusting for inflation.

Spot Rate

The current market price at which a particular asset, such as currency, commodity, or security, can be bought or sold for immediate settlement.

Exchange Rates

The price of one country's currency in terms of another currency, influencing international trade and investment.

Pesos

The currency used in various Latin American countries and the Philippines, symbolized by "$" or "₱" depending on the country.