Quiz on Management of Current Liabilities

What is a pro of short-term financing?

• High interest rate

• Potential to debt

• Requires frequent payments

• Long repayment terms

Which approach uses more long-term financing to avoid credit-related risk?

• Spontaneous approach

• Aggressive approach

• Conservative approach

• Maturity-matching approach

What is a spontaneous source of financing?

• Commercial paper

• Trade credit

• Bank loans

• Factoring

Which of the following is a source of short-term financing?

• Accruals

• Long-term bonds

• Real estate loans

• Equity securities

What is a disadvantage of commercial paper?

• Requires collateral

• Limited maturity

• Impersonal nature

• High interest rates

What does the aggressive approach aim to achieve?

• Stabilize cash flow

• Reduce debt

• Maximize profitability

• Minimize risk

Which of the following is an example of unsecured short-term credit?

• Commercial paper

• Accounts receivable loans

• Inventory loans

• Trade credit

What is the primary characteristic of the maturity-matching approach?

• Uses only short-term financing

• Avoids all forms of debt

• Focuses solely on long-term assets

• Matches maturities of assets and liabilities

What is a key feature of trade credit?

• Requires collateral

• Is a spontaneous source of financing

• Has fixed repayment terms

• Is only available to large firms

Which of the following is NOT a source of short-term financing?

• Factoring

• Accruals

• Commercial banks

• Long-term bonds