which of the following is true and to how to finance a company? a. When a...

which of the following is true and to how to finance a company?

a. When a company sells long-term assets to pay for current liabilities such as payroll, this is a sign the that the company is doing well financially and normal in business.

b. When a you buy current assets such as office supplies or inventory with a Long-term bond issue, this is a sign the that the company is doing well financially and normal in business.

c. When a company buys current assets such as inventory with current liabilities such as accounts payable, this is a sign the that the company is doing well financially and normal in business.

d. None of the above are true

e. All of the above are true

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Expert Solution

which of the following is true and to how to finance a company?

a. When a company sells long-term assets to pay for current liabilities such as payroll, this is a sign the that the company is doing well financially and normal in business.INCORRECT; When the long term assets are being used to pay / settle the short term liabilities / expenses, it is the situation that the company is not at all doing well and could land in to bankruptcy in near future.

b. When a you buy current assets such as office supplies or inventory with a Long-term bond issue, this is a sign the that the company is doing well financially and normal in business.INCORRECT; Long term debt (Bonds or other instruments) are generally raised to suppor the company for its long term investments, like purchase of igh value fixed assets, Capacity expansion, Business acquisitions, and other strategic projects. If long term issues are being spent on current assets, this shall, in long term, create turbulence in the working captital management and also, the funds are considered as misappropriated.

c. When a company buys current assets such as inventory with current liabilities such as accounts payable, this is a sign the that the company is doing well financially and normal in business.CORRECT; This is the ideal financial management where by managing inventory, receivables and payables based on the cash conversion cycle of the company.

d. None of the above are true

e. All of the above are true

jeff jeffy answered 1 year ago

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