Using accounts payable that must be paid within 30 days to finance inventory that turns over monthly would be an example of self-liquidating debt.

Question

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Self-liquidating debt refers to borrowed funds that finance the purchase of assets that generate enough cash flow to repay the debt within a specific period. In this case, using accounts payable (which are debts that must be paid within 30 days) to purchase inventory that turns over monthly generates cash flow that can be used to repay the debt within the same period, making it an example of self-liquidating debt.

Using Accounts Payable That Must Be Paid Within 30 Days