Which of the following illustrates the use of a hedging approach to financing assets? A. Temporary current assets financed with long-term liabilities. B. Permanent working capital financed with long-term liabilities. C. Short-term assets financed with equity D. All assets financed with a mixture of 50% equity and 50% long-term debt

Which of the following illustrates the use of a hedging approach to financing assets?

A. Temporary current assets financed with long-term liabilities.

B. Permanent working capital financed with long-term liabilities.

C. Short-term assets financed with equity

D. All assets financed with a mixture of 50% equity and 50% long-term debt
by

1 Answer

Answer :

B. Permanent working capital financed with long-term liabilities.
by

Related questions

Which of the following statements is most correct? A. For small companies, long-term debt is the principal source of external financing. B. Current assets of the typical manufacturing firm account for over half of its total assets. C. Strict adherence to the maturity matching approach to financing wD. Similar to the capital structure management, working capital management requires the financial manager to make a decision and not address the issue again for several months.ould call for all current assets to be financed solely with current liabilities.

Description : Which of the following statements is most correct? A. For small companies, long-term debt is the principal source of external financing. B. Current assets of the typical manufacturing firm account ... the financial manager to make a decision and not address the issue again for several months.

Last Answer : B. Current assets of the typical manufacturing firm account for over half of its total assets.

Which of the following statements relating to working capital financing is not correct? A. An aggressive policy uses long-term debt to finance fluctuating current assetsB. Long-term debt is less risky that short-term debt C. A conservative policy uses long-term debt to finance fixed assets D. Short-term debt is cheaper than long-term debt E. The matching principle indicates that fluctuating current assets should be financed by short-term debt

Description : Which of the following statements relating to working capital financing is not correct? A. An aggressive policy uses long-term debt to finance fluctuating current assets B. Long-term debt ... . The matching principle indicates that fluctuating current assets should be  financed by short-term debt

Last Answer : A. An aggressive policy uses long-term debt to finance fluctuating current assets

Identify the incorrect statement in connection with working capital management. A. Long-term funds are more expensive than short-term funds but also riskier B. The objectives of working capital management are profitability and liquidity C. Permanent current assets should be financed from long-term sources if a moderate or matching policy is adopted D. Conservative financing policies use short-term funds to finance only part of fluctuating current assets E. Aggressive financing policies increase profitability at the cost of higher risk

Description : Identify the incorrect statement in connection with working capital management. A. Long-term funds are more expensive than short-term funds but also riskier B. The objectives of ... fluctuating current assets E. Aggressive financing policies increase profitability at the cost of higher risk

Last Answer : A. Long-term funds are more expensive than short-term funds but also riskier

Which of the following would be consistent with a hedging (maturity matching) approach to financing working capital? A. Financing short-term needs with short-term funds B. Financing short-term needs with long-term debt. C. Financing seasonal needs with long-term funds. D. Financing some long-term needs with short-term funds.

Description : Which of the following would be consistent with a hedging (maturity matching) approach  to financing working capital? A. Financing short-term needs with short-term funds B. Financing short-term needs ... needs with long-term funds. D. Financing some long-term needs with short-term funds.

Last Answer : A. Financing short-term needs with short-term funds

Which of the following would be consistent with an aggressive approach to financ ing working capital? A. Financing short-term needs with short-term funds. B. Financing permanent inventory buildup with long-term debt. C. Financing seasonal needs with short-term funds. D. Financing some long-term needs with short-term funds

Description : Which of the following would be consistent with an aggressive approach to financ ing  working capital? A. Financing short-term needs with short-term funds. B. Financing permanent inventory buildup with ... needs with short-term funds. D. Financing some long-term needs with short-term  funds

Last Answer : D. Financing some long-term needs with short-term  funds.

Your firm has a philosophy that is analogous to the hedging (maturity matching) approach. Which of the following is the most appropriate form for financing a new capital investme nt in plant and equipment? A. Trade credit. B. 6-month bank notes. C. Accounts payable. D. Common stock equity

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Last Answer : D. Common stock  equity. 

Your firm has a philosophy that is analogous to the hedging (maturity matching) approach. Which of the following is the most appropriate non-spontaneous form for financing the excess seasonal current asset needs? A. Trade credit. B. 6-month bank notes. C. Accounts payable. D. Common stock equity.

Description : Your firm has a philosophy that is analogous to the hedging (maturity matching) approach. Which of the following is the most appropriate non-spontaneous form for financing the excess seasonal current asset needs? ... credit. B. 6-month bank notes. C. Accounts payable. D. Common stock equity.

Last Answer : B. 6-month bank notes.

Which of the following would be consistent with a conservative approach to financ ing working capital? A. Financing short-term needs with short-term funds. B. Financing short-term needs with long-term debt. C. Financing seasonal needs with short-term funds. D. Financing some long-term needs with short-term funds.

Description : Which of the following would be consistent with a conservative approach to financ ing  working capital? A. Financing short-term needs with short-term funds. B. Financing short-term needs with long- ... seasonal needs with short-term funds. D. Financing some long-term needs with short-term funds.

Last Answer : B. Financing short-term needs with long-term debt.

Under a conservative financing policy a firm would use long-term financing to finance some of the temporary current assets. What should the firm do when a "dip" in temporary current assets causes total assets to fall below the total long-term financing? A. Use the excess funds to pay down long-term debt. B. Invest the excess long-term financing in marketable securities. C. Use the excess funds to repurchase common stock. D. Purchase additional plant and equipment.

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Last Answer : B. Invest the excess long-term financing in marketable securities.

The amount of current assets required to meet a firm's long-term minimum needs is referred to as working capital. A. permanent B. temporary C. net D. gross

Description : The amount of current assets required to meet a firm's long-term minimum needs is  referred to as working capital. A. permanent B. temporary C. net D. gross

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In deciding the optimal level of current assets for the firm, management is confronted with . A. a trade-off between profitability and risk B. a trade-off between liquidity and risk C. a trade-off between equity and debt D. a trade-off between short-term versus long-term borrowing

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Last Answer : A. a trade-off between profitability and risk

The amount of current assets that varies with seasonal requirements is referred to as working capital. A. permanent B. net C. temporary D. gross

Description : The amount of current assets that varies with seasonal requirements is referred to as  working capital. A. permanent B. net C. temporary D. gross

Last Answer : C. temporary

Net working capital refers to A. total assets minus fixed assets B. current assets minus current liabilities C. current assets minus inventories D. current

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To financial analysts, "working capital" means the same thing as . A. Total assets B. fixed assets C. current assets D. current assets minus current liabilities.

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Last Answer : C. current assets

Having defined working capital as current assets, it can be further classified according to . A. financing method and time B. rate of return and financing method C. time and rate of return D. components & time

Description : Having defined working capital as current assets, it can be further classified according to  . A. financing method and time B. rate of return and financing method C. time and rate of return D. components & time

Last Answer : D. components & time

Which of the following factors does not need to be considered when formulating policies on the level and financing of working capital? A. The attitude to risk of a company’s managers B. The relative cost of short-term and long-term finance C. The availability of revenue reserves and capital reserves D. Terms of trade offered by competitors

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Permanent working capitalA. varies with seasonal needs B. includes fixed assets C. is the amount of current assets required to meet a firm's long-term minimum needs D. includes accounts

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Value of a firm is usually based on ________. a) the value of debt and equity b) the value of assets and liabilities c) the value of debt d) the value of equity

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