Question

Current assets of a business firm should be financed through

(a) current liability only

(b) long-term liability only

(c) both types (i.e. Long and short liabilities)

Answer 1

(c) Current assets are those assets which get converted in cash or cash equivalents within a short span of time and provide liquidity to a business. For financing the current assets of a business, both types of liabilities (short and long) can be used.