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When a firm finances each asset with a financial instrument of the same approximate maturity as the life of the asset, it is applying:
Working capital management matches the maturity life of each asset with the length of the financial instrument used to finance that asset.
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If a firm increases its cash balance by issuing additional shares of common stock, working capital:
An increase in cash balance by issuing more common stock would increase assets and equity, thus increasing working capital and current ratio.
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The main reason that a firm would strive to reduce the days sales in accounts receivable is to increase:
Reducing the A/R cycle increases cash collected and on hand.
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Which of the following would increase the working capital of a firm?
This answer would increase the working capital of a firm as the amount of this current liability is transferred to a long term liability.
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The working capital financing policy that subjects the firm to the greatest risk of being unable to meet the firm's maturing obligations is the policy that finances:
The working capital financing policy that finances permanent current assets with short term debt subjects the firm to the greatest risk of being unable to meet the firm's maturing obligations.
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Fewer days sales in accounts receivable are:
Reducing the number of days it takes to collect cash is ideal for a company, as long as it does not reduce the number of sales to customers. Customers may not like this shortened receivable policy.
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