When a Firm Finances Long-Term Assets with Short-Term Sources of Funding

question 47

Multiple Choice

When a firm finances long-term assets with short-term sources of funding, it:

• A)reduces the risk of cash shortage
• B)will have lower interest expense
• C)improves the leverage ratio
• D)is ignoring the principle of matched maturities

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Definitions:

Council Of Economic Advisers

A team of economic advisors who provide counsel on economic policy to the President of the United States.

Congressional Budget Office

A nonpartisan federal agency within the legislative branch of the United States government that provides budget and economic information to Congress.

Economic Policy

Decisions made by governments concerning the economic goals of the nation and the methods of achieving those goals.

Y-Coordinate

The vertical position in a two-dimensional Cartesian coordinate system, representing the distance from the x-axis.