Ski Lifts Inc.is in a highly seasonal business,and the following summary balance sheet data show its assets and liabilities at peak and off-peak seasons (in thousands of dollars):What can we conclude from this data? $\begin{array}{lrr}
& \text { Peak } & \text { Off-Peak } \
\text { Cash } & \$ 50 & \$ 30 \
\text { Marketable securities } & 0 & 20 \
\text { Accounts receivable } & 40 & 20 \
\text { Inventories } & 100 & 50 \
\text { Net fixed assets } & \underline{500} & \underline{500} \
\text { Total assets } & \$ 690 & \$ 620\
\
\text { Spontaneous liabilities } & \$ 30 & \$ 10 \
\text { Short-term bank debt } & 50 & 0 \
\text { Long-term debt } & 300 & 300 \
\text { Common equity } & 310 & 310 \
\text { Total claims } & \underline { \$ 690} & \underline { \$ 620 }\

\end{array}$

Question

Ski Lifts Inc.is in a highly seasonal business,and the following summary balance sheet data show its assets and liabilities at peak and off-peak seasons (in thousands of dollars):What can we conclude from this data? $\begin{array}{lrr}
& \text { Peak } & \text { Off-Peak } \
\text { Cash } & \$ 50 & \$ 30 \
\text { Marketable securities } & 0 & 20 \
\text { Accounts receivable } & 40 & 20 \
\text { Inventories } & 100 & 50 \
\text { Net fixed assets } & \underline{500} & \underline{500} \
\text { Total assets } & \$ 690 & \$ 620\
\
\text { Spontaneous liabilities } & \$ 30 & \$ 10 \
\text { Short-term bank debt } & 50 & 0 \
\text { Long-term debt } & 300 & 300 \
\text { Common equity } & 310 & 310 \
\text { Total claims } &  \underline { \$ 690} &  \underline { \$ 620 }\

\end{array}$

Quizplus · Accepted Answer

The relatively stable net fixed assets and total claims at both peak and off-peak seasons suggest that Ski Lifts follows a conservative approach to working capital financing. Some of its short-term needs are met by permanent capital. Option A is incorrect because there are differences between the peak and off-peak working capital requirements. Ski Lifts seems to be financing some of its seasonal needs with discretionary debt, which is relatively more expensive as compared to spontaneous liabilities. Hence, option B is incorrect. Option D is incorrect because the question specifically focuses on working capital financing and the adequacy of funding sources for current assets and liabilities.

Ski Lifts Inc A)Ski Lifts's Working Capital Financing Policy Calls for Exactly Matching