Question

Tidewater Distributors is successfully using short-term financing to buy inventory for resale. As sales climb, the managers realize that they must decide what to do with the money. Since you are the financial manager, they ask for your advice. You advise them to first.

Answer 1

Answer:

The cash inflow from the increase in sales revenue should be used to repay the loan

Explanation:

Short-term finance are loan facilities that have a tenor of less than a year. These are loans required to cater for short-term finance requirement.

The cash inflow from increase in sales is a pointer to the fact that Tidewater Distributors is able to repay the short term loan before the agreed date, The early liquidation of the short-term obligation will save the entity the loan interest for the unexpired period.