Firms Generally Choose to Finance Temporary Net Operating Working Capital

question 90

Multiple Choice

Firms generally choose to finance temporary net operating working capital with short-term debt because

• A) Matching the maturities of assets and liabilities reduces risk.
• B) Short-term interest rates have traditionally been more stable than long-term interest rates.
• C) A firm that borrows heavily long-term is more apt to be unable to repay the debt than a firm that borrows heavily short-term.
• D) The yield curve has traditionally been downward sloping.
• E) Sales remain constant over the year, and financing requirements also remain constant.

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