Question

An example of a situation in which company needs credit for investing activities is: Select one: A. Start-up operating losses B. Refinancing of debt C. Mergers and acquisitions D. Seasonal sales patterns

Answer 1

C. Mergers and acquisitions

Step-by-step explanation:

The need for credit will be determined by the activities that an organisation wants to embark or engage in

For instance

1. Start-up operating loss will be an operating activity decision because issues such as net income and its cash flows are determined under operating activities

2. Refinancing of debt - This is a financing decision it has to do with how an organisation's capital is acquired. Gearing is involved so it is a financing decision

3. Seasonal Sales Patterns affect net income or net loss for a particular period and when net income or loss is involved it is an operating decision

4. Mergers and Acquisitions However, will mean a company is about to invest in another company mainly through the purchase of its assets. Once the purchase of assets are involved then it is an investing activity.