Which of the Following Statements Is NOT CORRECT

question 19

Multiple Choice

Which of the following statements is NOT CORRECT?

• A)Commercial paper can be issued by virtually any firm so long as it is willing to pay the going interest rate.
• B)Accruals are "free" in the sense that no explicit interest is paid on these funds.
• C)A conservative approach to working capital management will result in most if not all permanent current operating assets being financed with long-term capital.
• D)The risk to a firm that borrows with short-term credit is usually greater than if it borrowed using long-term debt.This added risk stems from the greater variability of interest costs on short-term debt and possible difficulties with rolling over short-term debt.
• E)Bank loans generally carry a higher interest rate than commercial paper.

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Definitions:

Labor

The work performed by humans that is used in the production of goods and services.

Diminishing Marginal Returns

An economic principle stating that as one factor of production increases while others remain constant, the incremental gains in output will eventually decrease.

Input

Resources such as labor, materials, and capital used in the production of goods and services.

Average Fixed Cost

The fixed costs of production (costs that do not change with the level of output) divided by the quantity of output produced.