Holidays, Etc. produces and distributes seasonal merchandise to retail outlets. The firm has adopted a compromise short-term financial policy. Given this information, which one of the following statements must be true?

A) The company finances all of its operations internally.
B) The company sometimes invests in marketable securities and sometimes borrows short-term funds.
C) The company finances all of its short-term funding needs externally.
D) The total debt of the firm follows a linear path.
E) The long-term financing needs of the firm decreases as the firm grows.

Question

Brynne Wolfe · Accepted Answer

Final Answer : B, Explanation :  A compromise short-term financial policy typically involves a mix of internal financing (such as retained earnings) and external financing (such as short-term borrowing) to meet the firm's needs. This approach allows a company to adapt to varying financial requirements and opportunities, such as investing surplus funds in marketable securities when available and borrowing when necessary.

Definitions

Learning Objectives

Learning Objectives

Related questions