Which of the following statements is CORRECT?
A) Accruals are an expensive but commonly used way to finance working capital.
B) A conservative financing policy is one where the firm finances part of its fixed assets with short-term capital and all of its net working capital with short-term funds.
C) If a company receives trade credit under terms of 2/10, net 30, this implies that the company has 10 days of free trade credit.
D) One cannot tell if a firm has a conservative, aggressive, or moderate current asset financing policy without an examination of its cash budget.
E) If a firm has a relatively aggressive current asset financing policy vis-à-vis other firms in its industry, then its current ratio will probably be relatively high.
Multiple Choice: Problems

Question

Quizplus · Accepted Answer

The terms 2/10, net 30 mean that the customer can take a 2% discount if the payment is made within 10 days, or the full amount is due within 30 days. Therefore, the company has 10 days to take advantage of the discount, but the full payment is due in 30 days.

Which of the Following Statements Is CORRECT