When considering how to finance the acquisition of an asset,which of the following statements is true?

Question

Quizplus · Accepted Answer

The cash flows generated by the asset should dictate the type of financing used. For example, if the asset generates steady cash flows, it may be appropriate to use a noninterest bearing note. If the asset generates irregular cash flows, it may be more appropriate to use an installment note. The amount borrowed should also be based on the cash flows generated by the asset and not necessarily exceed the cost of the asset. It is not advisable to base the type of asset acquired solely on the cash flow required by the type of note used. Finally, borrowing should not be avoided altogether as it can be a useful tool in financing asset acquisitions.

When Considering How to Finance the Acquisition of an Asset,which