Question

A fixed asset should be financed through:
a. a long-term liability
b. short-term liability
c. a mix of long and short-term liabilities

Answer 1

Answer:

A fixed asset should be financed through: a long-term liability  

Among the given options option (a)  a long-term liability is the correct answer.

 

Explanation:

Fixed assets are those assets, which are acquired and held permanently in the business for future benefits , for example plant and machinery, land and building, etc. It provides the base for foundation of a business and absorbs the shocks of business.

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Here are more questions of the same chapter :  

Financial planning arrives at:

a. minimising the external borrowing by resorting to equity issues  

b. entering that the firm always have significantly more fund than required so that there is no paucity of funds  

c. ensuring that the firm faces neither a shortage nor a glut of unusable funds  

d. doing only what is possible with the funds that the firms has at its disposal

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Higher dividend per share is associated with:  

a. high earnings, high cash flows, unstable earnings and higher growth opportunities.  

b. high earnings, high cash flows, stable earnings and high growth opportunities  

c. high earnings, high cash flows, stable earnings and lower growth opportunities  

d. high earnings, low cash flows, stable earnings and lower growth opportunities.

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Answer 2

Fixed assets are those assets which are invested in a company for a longer time period, generally more than one year. As these assets have long term implication on the business in terms of growth and profitability, they should be financed through long term liabilities such as long term loans, preference shares, retained earnings, etc.