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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Definitions:

Apraxia

A motor disorder caused by damage to the brain, in which individuals have difficulty with the motor planning to perform tasks or movements when asked, despite understanding the request and having the desire to perform the task.

Visual Association Area

A region of the brain involved in processing visual information, integrating color, form, and motion into coherent perceptions.

Wernicke Area

A region of the brain important for language comprehension, located in the temporal lobe.

Broca Area

A region in the frontal lobe of the brain associated with speech production, language processing, and language comprehension.