Seasonal buildups of inventory and receivables are generally financed with ________.
A) short-term loans
B) long-term loans
C) retained earnings
D) stockholders' equity

Question

Quizplus · Accepted Answer

Seasonal buildups of inventory and receivables are short-term in nature, therefore they should be financed with short-term loans. Using long-term loans or stockholders' equity would result in unnecessary interest expenses or dilution of ownership. Retained earnings may not be sufficient to cover the entire buildup, and using them may restrict the company's ability to invest in other opportunities.

Seasonal Buildups of Inventory and Receivables Are Generally Financed with ________