A toy manufacturer following the self-liquidating debt principle will generally finance seasonal inventory build-up prior to the Holiday season with [blank].
A)common stock
B)selling equipment
C)trade credit
D)preferred stock

Question

Quizplus · Accepted Answer

The self-liquidating debt principle advocates that short-term loans should be used to finance seasonal increases in inventory, which will eventually be sold and generate cash to repay the loan. Trade credit is a type of short-term loan that offers flexible repayment terms and is often used by manufacturers to finance inventory build-up before the holidays. Using common stock, selling equipment, or issuing preferred stock may not be optimal for financing seasonal inventory build-up because they involve either diluting ownership or giving up valuable assets.

A Toy Manufacturer Following the Self-Liquidating Debt Principle Will Generally