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

question 51

Multiple Choice

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

• A) Matching the maturities of assets and liabilities reduces risk.
• B) Short-term interest rates traditionally have 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 the firm that borrows heavily short-term.
• D) The yield curve traditionally has been downward sloping.
• E) Sales remain constant over the year,and financing requirements also remain constant.

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