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Which of the following statements is incorrect? All the answers are correct except one. Long-term financing...

Which of the following statements is incorrect?

All the answers are correct except one.

Long-term financing strategy relies on long-term debt to finance both capital assets and working capital.

Receivables in the balance sheet represent the amount owed to the firm’s vendors and suppliers for materials purchased on credit.

Receivables in the balance sheet represent the amount owed by customers who have availed themselves of the firm’s trade credit facility.

If shortage costs dominate carrying costs, the firm will need to move towards a more flexible policy.

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Homework Answers

Answer #1

Option D is correct. If shortage costs dominate carrying costs, the firm will need to move towards a more flexible policy.

because when carrying cost cost are less than the Shortage cost, the firm should adopt a restrictive policy to enhance the firm's value by reducing the cost by a restrictive policy.

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