Firms Generally Choose to Finance Temporary Current Assets with Short-Term

question 22

Multiple Choice

Firms generally choose to finance temporary current assets with short-term debt because

• A) matching the maturities of assets and liabilities reduces risk under some circumstances,and also because short-term debt is often less expensive than long-term capital.
• B) short-term interest rates have traditionally been more stable than long-term interest rates.
• C) a firm that borrows heavily on a long-term basis is more apt to be unable to repay the debt than a firm that borrows short term.
• D) the yield curve is normally downward sloping.
• E) short-term debt has a higher cost than equity capital.

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Definitions:

Organizational Justice

The perception of fairness in the workplace, including fair treatment, distribution of resources, and information sharing.

Herzberg's Two-Factor Theory

A motivational theory which suggests that there are certain factors in the workplace that cause job satisfaction, while a separate set of factors cause dissatisfaction.

Goldilocks Rule

suggests finding a balance in tasks or challenges that are neither too easy nor too difficult to maintain motivation and engagement.

Goal-Setting Theory

A theory that emphasizes the importance of setting specific, measurable, achievable, relevant, and time-bound goals to enhance motivation and performance.