Which of the Following Statements Best Describes Short-Term Versus Long-Term

question 28

Multiple Choice

Which of the following statements best describes short-term versus long-term financing?

• A) Flexibility is an advantage of short-term credit, but this is somewhat offset by the high flotation costs associated with the need to repeatedly renew short-term credit.
• B) A short-term loan can usually be obtained more quickly than a long-term loan, but the penalty for early repayment of a short-term loan is normally significantly higher than that for a long-term loan.
• C) The flexibility, cost, and riskiness of short-term versus long-term credit are dependent on the type of credit that is actually used.
• D) Short-term debt is often less costly than long-term debt, and the major reason for this is that short-term debt exposes the borrowing firm to much less risk than long-term debt.

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Definitions:

Gestation Time

The duration of time between conception and birth in animals, including humans.

Standard Deviation

A statistic that measures the dispersion or variability of a set of data points relative to its mean, used to quantify the amount of variation or dispersion.

Upper Quartile

It is the median of the upper half of a data set, marking the 75th percentile, where 75% of the data points are below this value.

Standard Normal Distribution

A normal distribution with a mean of 0 and a standard deviation of 1.