Reference no: EM131798856

Question - Swim Suits Unlimited is in a highly seasonal business, and the following summary balance sheet data show its assets and liabilities at peak and off-peak seasons (in thousands of dollars):

                                                                 Peak      Off-Peak

Cash                                                          $ 50        $ 30

Marketable securities                                      0              20

Accounts receivable                                        40           20

Inventories                                                    100         50

Net fixed assets                                             500         500

Total assets                                                   $690       $620

Payables and accruals                                    $ 30        $ 10

Short-term bank debt                                     50           0

Long-term debt                                              300         300

Common equity                                             310         310

Total claims                                                   $690       $620

From this data we may conclude that

a. Swim Suits' current asset financing policy calls for exactly matching asset and liability maturities.

b. Swim Suits' current asset financing policy is relatively aggressive; that is, the company finances some of its permanent assets with short-term discretionary debt.

c. Swim Suits follows a relatively conservative approach to current asset financing; that is, some of its short-term needs are met by permanent capital.

d. Without income statement data, we cannot determine the aggressiveness or conservatism of the company's current asset financing policy.

e. Without cash flow data, we cannot determine the aggressiveness or conservatism of the company's current asset financing policy.