15. In the context of working capital an accrual is not a. an estimate of an obl
ID: 2797379 • Letter: 1
Question
15. In the context of working capital an accrual is not
a. an estimate of an obligation of the firm
b. effectively a short term loan from the unpaid supplier of services
c. an adjustment to the accrued depreciation account
d. a source of spontaneous financing
All but one of the following are associated with short-term debt?
a.
Easily available to most companies.
b.
It is usually the lowest cost financing.
c.
It is a flexible form of financing.
d.
It is usually used to finance long-term assets.
a.
Easily available to most companies.
b.
It is usually the lowest cost financing.
c.
It is a flexible form of financing.
d.
It is usually used to finance long-term assets.
Explanation / Answer
15. C.an adjustment to the accrued depreciation account.
(woking capital is concerned with accruals which are either current assets or current liabilities,
an adjustment to accrued depreciation account is neither a current asset nor a current liability and is not considered in the working capital calculation).
16. D.It is usually used to finance long term assets.
(Short term debt is mainly used to finance working capita requirements, but not longterm assets)
(if an entity uses short term debt to finance long term assets, it is an indication of financial sickness).
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