If a Firm Uses Long-Term Financing to Cover Short-Term Needs

question 12

Multiple Choice

If a firm uses long-term financing to cover short-term needs it is:

• A) assuring itself of having adequate capital at all times.
• B) is taking a profitable approach to financing.
• C) is taking a relatively risky approach to financing.
• D) incurring a lower overall interest cost in comparison with short-term financing.

---

Definitions:

Majority Influence

The effect that the larger group has on individuals causing them to conform or change their opinions to align with the group's.

Normative Pressure

The influence of societal norms and expectations on an individual's behavior.

Risky Shift

The phenomenon where groups tend to make riskier decisions compared to the decisions made by individuals.

Riskier Decisions

Refers to choices made under conditions of uncertainty that have a significant chance of leading to negative outcomes.