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:

Hierarchical Organization

The arrangement of entities in a graded series of levels, each level subordinate to the one above it.

Living Things

Organisms that exhibit the characteristics of life, such as growth, reproduction, responsiveness to the environment, and metabolic processes.

Tissues

Groups of similar cells that work together to perform a specific function in the body, such as muscle, nerve, and epithelial tissues.

Structural Unit

The smallest part of a structure that retains the functional properties of the larger structure, such as cells in an organism or bricks in a building.