Sources of short-term financing such as accounts payable, notes payable, and accruals should be used to finance:
A)all current assets
B)all fixed assets
C)a portion of the current assets needed to support nonseasonal sales levels plus all of the seasonal build-up in current assets
D)a portion of the fixed assets plus all of the seasonal build-up in current assets

Question

Quizplus · Accepted Answer

Short-term sources of financing such as accounts payable, notes payable, and accruals should be used to finance a portion of the current assets needed to support nonseasonal sales levels plus all of the seasonal build-up in current assets. This allows the company to effectively manage its cash flow and take advantage of opportunities for growth without taking on too much debt. All current assets or fixed assets are not appropriate choices as they may lead to overreliance on short-term financing, which can be risky in the long run.

Sources of Short-Term Financing Such as Accounts Payable, Notes Payable