Which of the Following Is Most Consistent with the Self-Liquidating

question 78

Multiple Choice

Which of the following is most consistent with the self-liquidating debt principle in working capital management?

• A)Fixed assets should be financed with short-term notes payable.
• B)Inventory should be financed with preference shares.
• C)Accounts receivable should be financed with short-term lines of credit.
• D)Borrow on a floating rate basis to finance investments in permanent assets.

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Definitions:

Utility-maximizing Combination

This refers to a situation where a consumer selects a combination of goods and services that provides the highest level of satisfaction or utility, given their budget constraint.

Marginal Utilities

The increased contentment or value obtained by a consumer through the consumption of one extra unit of a good or service.

Diminishing Marginal Utility

The principle that as a person increases consumption of a product, there is a decline in the marginal utility that person derives from consuming each additional unit of that product.

Income Effect

The change in an individual's or economy's income and how that change will affect the quantity demanded of a good or service.