The firm's financing requirements can be separated into:
A) current liabilities and long-term funds
B) current assets and fixed assets
C) current liabilities and long-term debt
D) seasonal and permanent
A firm's financing requirements range across various requirements and periods. These requirements may relate to working capital, capital investments, liquidity requirements, etc. The seasonal funding is relatively short term and comes from temporary sources of capital such as credit lines, commercial papers, etc. The permanent funding is ling term and comes from usual debt and equity the firm issues.
Answer and Explanation:
- The firm's financing requirements can be separated into D) seasonal and permanent.
The financing requirements may include current liabilities, long term funds, fixed assets, etc. but are classified as seasonal and permanent. Seasonal requirements can be related to sales increases and decreases, payment of large liability such as rent, tax, etc.
Let's analyze other options too:
A) current liabilities and long-term funds - The current liabilities are a direct financing requirement rather than a source.
B) current assets and fixed assets - The current assets and the fixed assets are present as a result of the financing source and are not financing the source themselves.
C) current liabilities and long-term debt - In addition to debt, there are many other financing sources such as equity which form the permanent financing source.
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from Corporate Finance: Help & ReviewChapter 8 / Lesson 7