A Major Reason for Using Short-Term Debt for Capital Expenditures

question 69

Multiple Choice

A major reason for using short-term debt for capital expenditures is which of the following?

• A)because long-term interest rates are expected to come down in the future.
• B)because technology in today's world has great fluctuations in cost and long-term financing may not pay.
• C)because the project at hand may not be solid enough for long-term risk.
• D)because the accounting staff must have something to do now that computers do most of the work.

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Definitions:

Required Return

The minimum yearly interest rate that entices both individuals and companies to invest in a specific security or endeavor.

Share Dividend

A dividend payment made in the form of additional shares rather than a cash payout, often opted by a company to conserve cash.

Start-Up Company

A newly established business, often in the early stage of development, focused on a unique product or service idea.

Desired Rate

The specific rate of return that an investor aims for on an investment.