Quiz Ch 15 – T/F Reducing Trade Credit Costs by Delaying Payment
Fundamentals of Financial Management, Concise
Brigham and Houston
09th Edition
True or false: Delaying payment can reduce the calculated cost of trade credit.
True or false: Delaying payment can reduce the calculated cost of trade credit.
True or false: Any rise in a current asset must be matched by a corresponding increase in a current liability.
True or false: Net operating working capital is equivalent to the current ratio minus the quick ratio.
True or false: A firm with a revolving credit agreement with a bank typically faces lower funding risk compared to having an informal line of credit.
True or false: Using short-term debt extensively is considered an aggressive strategy for financing current assets, despite historically lower short-term interest rates, due to the inherent risks.
True or false: A line of credit, whether formal or informal, sets the maximum credit amount a bank will provide in the future, conditional on the borrower’s financial strength.
True or false: Permanent current assets are a reflection of the fact that some components of current assets don’t diminish to zero even during a business’s seasonal or cyclical lows. Consequently, these permanent current assets signify a minimal level of current assets that necessitates funding.
True or false: Managers should typically utilize free trade credit and consider using costly trade credit only if its cost is lower than alternative sources of credit.
True or false: The text discusses three different current asset investment policies that diverge based on the scale of current asset holdings.
True or false: A conservative working capital financing approach involves using long-term securities to finance permanent and some seasonal current assets.