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Questions and Answers
Which of the following statements about working capital financing is correct?
Which of the following statements about working capital financing is correct?
- c. A conservative policy uses short-term debt to finance fixed assets
- a. Long-term debt is less risky than short-term debt (correct)
- b. The matching principle indicates that fluctuating current assets should be financed by long-term debt
- d. Short-term debt is more expensive than long-term debt
According to the matching principle, how should fluctuating current assets be financed?
According to the matching principle, how should fluctuating current assets be financed?
- d. By a combination of short-term debt and long-term debt
- a. By short-term debt (correct)
- b. By long-term debt
- c. By equity financing
Which policy uses long-term debt to finance fixed assets?
Which policy uses long-term debt to finance fixed assets?
- c. Conservative policy (correct)
- a. Aggressive policy
- d. Neutral policy
- b. Moderate policy
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