Which short-term financing policy states that short-term cash needs should be financed with short-term debt and long-term cash needs should be financed with long-term sources of funds?
A) aggressive policy
B) evergreen credit
C) matching principle
D) conservatism principle

Question

Quizplus · Accepted Answer

The matching principle states that short-term cash needs should be financed with short-term debt and long-term cash needs should be financed with long-term sources of funds. This policy helps to ensure that the company's cash flow remains stable and that it is not burdened with excessive debt or funding costs. The aggressive policy favors the use of short-term debt to finance all needs, which increases the risk of default if short-term funding is not available. Evergreen credit refers to a type of credit that is continually renewed and is not necessarily linked to specific funding needs. The conservatism principle advocates for using conservative estimates of revenue and assets when making financial decisions, which may not be directly related to short-term financing policies.

Which Short-Term Financing Policy States That Short-Term Cash Needs Should