A firm which uses the aggressive financing strategy plans to purchase a major fixed asset financedwith a loan. The most likely consequence of this action is
A) an increase in long-term debt.
B) a decrease in the risk of technical insolvency.
C) a decrease in the current ratio.
D) an increase in net working capital.

Question

Quizplus · Accepted Answer

Aggressive financing strategy involves taking on more debt to finance business operations or purchases. Therefore, purchasing a major fixed asset through a loan will result in an increase in long-term debt. Choices B, C, and D are not likely consequences of aggressive financing strategy.

A Firm Which Uses the Aggressive Financing Strategy Plans to Purchase