Why Would a Firm Ever Use Short-Term Debt to Finance

question 6

Multiple Choice

Why would a firm ever use short-term debt to finance permanent current assets?

• A) This would be illogical and is rarely observed.
• B) This would occur if short-term rates were much lower than long-term rates.
• C) This would only occur if the managers were very conservative.
• D) None of the options.

---

Definitions:

Wages Expense

The total amount of compensation paid to employees for their labor, including hourly wages and salaries, before any deductions.

Budgeted Cost

Budgeted Cost refers to the estimated financial expenditure associated with a project or activity, outlined during the budgeting process.

Goods Sold

Refers to the total number of units of product sold by a company during a specific period.

Production Budget

An estimation of the costs that will be incurred on the production of goods or services, often part of a broader budgeting process.