Question:
The chief financial officer of Smith Glass Inc. follows the policy of matching the maturity of assets with the maturity of financing. The implications of this policy include all of the following except that
1. The seasonal expansion of cash, receivables, and inventory should be financed by short-term debt such as vendor payables and bank debt.
2. The minimum level of cash, receivables, and inventory required to stay in business can be considered permanent, and financed with long-term debt or equity.
3. Cash, receivables, and inventory should be financed with long-term debt or equity.
4. Long-term assets, like plant and equipment, should be financed with long-term debt or equity.