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Which of the following statements is incorrect?




1) If easing a firm's credit policy lengthens the collection period and results in a worsening of the aging schedule, then why do firms take such actions?;a. It normally stimulates sales.;b. To meet competitive pressures.;c. To increase the firm's deferral period for payables.;d. Statements a and b are correct.;e. All of the statements above are correct.;2) Which of the following statements is incorrect?;a. Commercial paper can be issued by virtually any firm so long as it is willing to pay the going interest rate.;b. Accrued liabilities represent a source of "free" financing in the sense that no explicit interest is paid on these funds.;c. A conservative approach to working capital will result in all permanent assets being financed using long-term securities.;d. The risk to the firm of borrowing with short-term credit is usually greater than with long-term debt. Added risk can stem from greater variability of interest costs on short-term debt.;e. Trade credit is often the largest source of short-term credit.


Paper#23007 | Written in 18-Jul-2015

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