Which of the following is an example of window dressing?
A) Borrowing on a long-term basis and using the proceeds to retire short-term debt would improve the current ratio and thus could be considered to be an example of window dressing.
B) Offering discounts to customers who pay with cash rather than buy on credit and then using the funds that come in quicker to purchase additional inventories is an example of window dressing.
C) Using some of the firm's cash to reduce long-term debt is an example of window dressing.
D) Window dressing is any action that improves a firm's fundamental, long-run position and thus increases its intrinsic value.

Question

Quizplus · Accepted Answer

Borrowing on a long-term basis and using the proceeds to retire short-term debt would improve the current ratio and thus could be considered to be an example of window dressing. Window dressing refers to any action taken by a company to improve its financial ratios or appearance, without actually changing the underlying economic reality. In this case, while the current ratio may improve, the company's cash flows and debt payments may actually be worsened in the long run.

Which of the Following Is an Example of Window Dressing