Firms Generally Choose to Finance Temporary Current Operating Assets with Short-Term

question 57

Multiple Choice

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

• A) short-term interest rates have traditionally been more stable than long-term interest rates.
• B) a firm that borrows heavily on a long-term basis is more apt to be unable to repay the debt than a firm that borrows short term.
• C) the yield curve is normally downward sloping.
• D) short-term debt has a higher cost than equity capital.
• E) matching the maturities of assets and liabilities reduces risk under some circumstances, and also because short-term debt is often less expensive than long-term capital.

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Definitions:

Leader Distributive Method

A leadership strategy concerning how resources, responsibilities, and rewards are allocated among members of a team or organization.

Follower Empowerment

The process of giving followers autonomy, confidence, and skills to contribute towards organizational goals independently.

Leadership Capacity

The potential or actual ability of an individual or organization to perform leadership roles and tasks, and to develop further as leaders.

Face-To-Face Teams

Groups that work together in the same physical location, allowing direct personal interaction among members.