A firm\'s asset or capital requirements grow over time and usually exhibit tempo

Question

A firm's asset or capital requirements grow over time and usually exhibit temporal (seasonal) variation. Firms must solve the challenge of how to finance their assets with a combination of short- and long-term financing. The following graph exhibits this relationship for a particular firm DOLLARS Long-term Financing Asset Requirements TIME Which of the following best characterizes this firm's policy of financing assets? O Aggressive policy Conservative policy Moderate policy Note the shaded region on the preceding graph. Which of the following statements best describes the firm's situation during this time? O The firm must rely on short-term borrowing. O The firm has excess capital to invest in cash or marketable securities.

Explanation / Answer

It is moderate policy as it is between relaxed and restricted

In the shaded region, the firm is having more funds available than the requirements. Hence, it is having extra capital to invest in cash or marketable securities

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