Generally speaking, short-term debt is riskier than long-term debt, but it also

Question

Generally speaking, short-term debt is riskier than long-term debt, but it also has some advantages. In the following table, identify which type of funding (short-term debt or long-term debt) is being described in each case Short-term Debt Long-term Debt This loan has more covenants that restrict the firm's actions. This loan is more flexible and can be used to adapt to changing market conditions. The lender will insist on a more thorough financial examination before extending this kind of credit. Globo-Chem Co.'s CFO is concerned with the possibility of interest rates rising over time. Which type of debt would be riskiest to Globo-Chem Co. if the firm is most concerned with rising interest rates? Short-term debt O Long-term debt

Explanation / Answer

1 long term debt

2 short term debt

3 long term debt

4 long term debt

In the possibility of rising interest rates company will go for long term debt, so that they can fix the current interest rates for the longer period.

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