The concept of a self-liquidating asset implies that
A) the working capital associated with a product will be liquidated within a one-year period.
B) all the product will be sold, receivables collected, and bills paid over the time period specified.
C) assets associated with the production of a product will be liquidated over the depreciable life of the assets.
D) self-liquidating assets will be financed by long-term sources of capital.

Question

Quizplus · Accepted Answer

A self-liquidating asset is one that generates enough cash flow to pay for itself over a specific period of time. In this case, the asset is a product, and the concept implies that all of the product will be sold, the associated receivables will be collected, and bills will be paid over the time period specified (which may vary depending on the nature of the product). Thus, option B is the best choice.

The Concept of a Self-Liquidating Asset Implies That