Question

As a result of cash flow shortages, Washington Department Stores has fallen behind in payments to suppliers. Some suppliers are withholding shipments to Washington until they receive payments on overdue accounts. To meet their immediate needs, Washington Department Stores should utilize: A) vulture capital B) long-term financing. C) contingency capital. D) short-term financing.

Answer 1

Answer:

The correct answer is letter "D": short-term financing.

Explanation:

Short-term financing allows companies to obtain capital for their day-to-day operations. The funds obtained are typically used for the transactions companies require during one period -one year, but the term for payment tends to be within six (6) to twenty-four (24) months. Under this scenario, the main purpose of firms is to keep their businesses up and running and obtain profits enough for the payment of the loan and reinvestment in the company.