Firms generally choose to finance temporary current assets with short-term debt

Question

Firms generally choose to finance temporary current assets with short-term debt because



a)matching the maturities of assets and liabilities reduces risk under some circumstances, and also because short-term debt is often less expensive than long-term capital.

b)short-term interest rates have traditionally been more stable than long-term interest rates.

c)a firm that borrows heavily on a long-term basis is more apt to be unable to repay the debt than a firm that borrows short term.

d)the yield curve is normally downward sloping.

e)short-term debt has a higher cost than equity capital.

Explanation / Answer

a is the answer matching the maturities of assets and liabilities reduces risk under some circumstances, and also because short-term debt is often less expensive than long-term capital.

Related Questions

Navigate

• Browse (All)
• Browse F
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.