Because the use of short-term debt to finance fixed assets is a working capital decision variable in the current period,it does not need to be taken into account when managers assess the firm's ability to meet its current obligations using expected cash inflows.

Question

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The use of short-term debt to finance fixed assets is a capital structure decision that affects the firm's ability to meet its current obligations using expected cash inflows. It needs to be taken into account when assessing the firm's liquidity and ability to meet its current obligations.

Because the Use of Short-Term Debt to Finance Fixed Assets