For Businesses, It Is Important to Consider the Future Path

question 25

Multiple Choice

For businesses, it is important to consider the future path of interest rates because:

• A) businesses use borrowed funds to leverage their financial returns.
• B) businesses use equity to leverage their financial returns.
• C) they affect the long-run level of unemployment in an economy.
• D) businesses use borrowed funds to maintain the high salaries of managers.

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Definitions:

Current Asset

An asset on the company's balance sheet that is expected to be sold, consumed, or converted into cash within one year or during the normal operating cycle of the business.

Patents

Legal rights granted to inventors that prevent others from making, using, or selling an invention for a certain period of time.

Marketable Securities

Financial instruments that can be easily converted into cash because they have high liquidity and short maturities.

Financial Leverage

Employing the use of debt to boost the prospective profits of an investment, which in turn escalates the risk of experiencing a loss.