« previous next »

Author Question: Why is it unwise for a construction company to finance the purchase of capital assets with its ... (Read 86 times)

skymedlock

  • Hero Member
  • *****
  • Posts: 561
on: Jul 26, 2018
Why is it unwise for a construction company to finance the purchase of capital assets with its working capital?
 
  What will be an ideal response?

Question 2

What is a line of credit and why do many construction companies obtain one from a bank?
 
  What will be an ideal response?


SeanoH09

  • Sr. Member
  • ****
  • Posts: 323
Reply #1 on: Jul 26, 2018
Answer to Question 1

Purchasing capital assets for cash usually is not a good strategy, because it may deplete the company's working capital such that it is unable to finance its cash flow requirements.

Answer to Question 2

A line of credit is a right to borrow funds up to a specified limit for a fee. It is similar to having a credit card in that a fee is assessed for the right to use the credit but interest is charged only on the unpaid balance.


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
« previous next »
 

Did you know?

The immune system needs 9.5 hours of sleep in total darkness to recharge completely.

Did you know?

People who have myopia, or nearsightedness, are not able to see objects at a distance but only up close. It occurs when the cornea is either curved too steeply, the eye is too long, or both. This condition is progressive and worsens with time. More than 100 million people in the United States are nearsighted, but only 20% of those are born with the condition. Diet, eye exercise, drug therapy, and corrective lenses can all help manage nearsightedness.

Did you know?

Thyroid conditions may make getting pregnant impossible.

Did you know?

The Romans did not use numerals to indicate fractions but instead used words to indicate parts of a whole.

Did you know?

Barbituric acid, the base material of barbiturates, was first synthesized in 1863 by Adolph von Bayer. His company later went on to synthesize aspirin for the first time, and Bayer aspirin is still a popular brand today.

This engraving by William Russell Birch shows Congress Hall (left), which was occupied by Congress f This engraving by William Russell Birch shows Congress Hall (left), which was occupied by Congress f
Louisiana Purchase Louisiana Purchase
A Production Function with Diminishing Marginal Product of Capital A Production Function with Diminishing Marginal Product of Capital
Principles of Managerial Finance, 14th Edition Principles of Managerial Finance, 14th Edition
Pharmaceutical Company Representatives Pharmaceutical Company Representatives
Your company advertises all prices on the menu board as a final price, including HST of 13%. A ... Your company advertises all prices on the menu board as a final price, including HST of 13%. A ...
Video: Coaductile pathway, Timing of contraction signal & Conduction system and ECG

For a complete list of videos, visit our video library