Seasonal build-ups of inventory and receivables are generally financed with
A) short-term loans.
B) long-term loans.
C) accruals.
D) stockholders' equity.

Question

Quizplus · Accepted Answer

Seasonal build-ups of inventory and receivables are short-term in nature and have a predictable repayment source, which is the sale of the inventory or collection of receivables. Hence, short-term loans are appropriate for funding such needs. Long-term loans are typically used for funding long-term investments in capital assets, such as machinery and equipment. Accruals and stockholders' equity are not typically used to finance seasonal build-ups of inventory and receivables.

Seasonal Build-Ups of Inventory and Receivables Are Generally Financed with