Which of the Following Issues Falls Under the Heading of Short-Term

question 408

Multiple Choice

Which of the following issues falls under the heading of short-term finance?

• A) Should a manufacturing plant be expanded to increase production capacity?
• B) How much money should a firm pay in interest expense each year?
• C) How much of a firm's current income should be paid out as dividends?
• D) Should a firm offer straight bonds or convertible bonds?
• E) How much money should a firm raise by issuing commercial paper?

---

Definitions:

Inflation Rate

The percentage increase in the price level of goods and services in an economy over a given period of time.

Nominal Interest Rate

The percentage increase in money that borrowers pay to lenders, not adjusted for inflation.

Real Interest Rate

The interest rate adjusted for inflation, representing the true cost of borrowing and the real yield to savers and investors.

Inflation Rate

The rate expressed in percentage terms showing the increase in prices for goods and services, leading to a reduction in buying power.