Asked by Taira DeSutter on Apr 29, 2024
Verified
Which statement best describes working capital financing policy?
A) Net working capital may be defined as current assets minus current liabilities, and an increase in the current ratio automatically indicates that net working capital has increased.
B) Although short-term interest rates have historically averaged less than long-term rates, the heavy use of short-term debt is considered to be an aggressive strategy because of the inherent risks of using short-term financing.
C) If a company follows a policy of "matching maturities," this means that it matches its use of common shares with its use of long-term debt as opposed to short-term debt.
Working Capital Financing Policy
Strategies a company uses to manage and finance its current assets and current liabilities to ensure it has sufficient liquidity to run its operations.
Net Working Capital
Current assets minus current liabilities.
Current Ratio
A financial metric that assesses a firm's capacity to meet immediate liabilities using its current assets.
- Grasp the concept of working capital financing policy.
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Learning Objectives
- Grasp the concept of working capital financing policy.
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