In an aggressive financing strategy, a firm anticipating a large increase in sales for the coming period should finance the increase in working capital with ________.
A) the sale of common stock
B) the sale of a bond issue
C) a line of credit
D) a long-term note from the bank

Question

Quizplus · Accepted Answer

A line of credit provides a flexible form of financing that can be used to cover short-term working capital needs, such as inventory and accounts receivable, which are likely to increase with an anticipated increase in sales. It allows the firm to borrow funds as needed and pay interest only on the amount borrowed. Selling common stock or issuing a bond may not be necessary or appropriate for short-term financing needs, and a long-term note from the bank may not be feasible or cost-effective for short-term financing.

In an Aggressive Financing Strategy, a Firm Anticipating a Large