Swim Suits Unlimited 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):
From this data we may conclude that

Question

Quizplus · Accepted Answer

The fact that Swim Suits has higher levels of permanent capital (equity and long-term debt) during the off-peak season suggests that it follows a relatively conservative approach to current asset financing. By using permanent capital to meet some of its short-term needs, Swim Suits is avoiding the risk of having to constantly roll over short-term debt during periods of lower sales. Option A is incorrect because the data shows that Swim Suits has more short-term debt during peak season than it has current assets. Option B is incorrect because the data does not indicate that Swim Suits finances any of its permanent assets with short-term debt. Options D and E are incorrect because income statement and cash flow data are not needed to make a conclusion about the company's current asset financing policy based on the information provided in the balance sheet data.

Swim Suits Unlimited Is in a Highly Seasonal Business,and the Following