Which of the following current asset financing policies reflects the decision to finance the peaks of current assets with long-term debt and equity that provides the firm with a surplus of cash and marketable securities most of the time, except during peak asset demand?
A) Flexible financing policy
B) Restrictive financing policy
C) Compromise financing policy
D) Alternative financing policy

Question

Quizplus · Accepted Answer

A flexible financing policy involves using long-term debt and equity to finance not only fixed assets but also the permanent part of current assets, with additional short-term financing used to cover peak demands. This approach often results in a surplus of cash and marketable securities during off-peak times, providing the firm with liquidity and financial flexibility.

Which of the Following Current Asset Financing Policies Reflects the Decision