Final answer:
The claim is false; a company's borrowing needs are not solely dependent on its operating cycle. Borrowing capacity is more directly related to a company's revenue and profit, which attest to its ability to repay. Companies typically borrow through banks or bonds, with bank loans being more suited for smaller firms and bonds for larger entities.
Step-by-step explanation:
The statement that a company's borrowing need is best documented by how long it takes it to generate sales from its operating cycle is false. A company's borrowing needs can be influenced by a variety of factors, including but not limited to the operating cycle. The ability of a firm to borrow money is more significantly tied to its ability to earn revenues and make a profit, as these factors provide a credible promise that the firm can pay interest on borrowed funds.
Firms have two main methods of borrowing: banks and bonds. Bank borrowing is usually more customized and better suited for smaller firms that can be closely monitored through their banking transactions, while issuing bonds is often associated with larger, well-known firms looking to raise capital for investments, paying off old bonds, or acquiring other firms.