Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Which of the following statements is CORRECT? a. If a firm that can borrow from its bank at a 6% interest rate buys materials on

Which of the following statements is CORRECT?

a. If a firm that can borrow from its bank at a 6% interest rate buys materials on terms of 2/10, net 30, and if it must pay by Day 30 or else be cut off, then we would expect to see zero accounts payable on its balance sheet.
b. If one of your firm's customers is "stretching" its accounts payable, this may be a nuisance but it will not have an adverse financial impact on your firm if the customer periodically pays off its entire balance.
c. Under normal conditions, a firm's expected ROE would probably be higher if it financed with short-term rather than with long-term debt, but using short-term debt would probably increase the firm's risk.
d. A short-term loan can usually be obtained more quickly than a long-term loan, but the cost of short-term debt is normally higher than that of long-term debt.
e. Conservative firms generally use no short-term debt and thus have zero current liabilities.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Institutions And Markets

Authors: Jeff Madura

10th International Edition

0538482176, 9780538482172

More Books

Students also viewed these Finance questions

Question

Where does the person work?

Answered: 1 week ago

Question

How effective have these groups been in the past?

Answered: 1 week ago

Question

What are their reputations?

Answered: 1 week ago

Question

How serious a response is warranted to this situation?

Answered: 1 week ago