Which of the Following Statements Concerning Liquidity and Debt Is

question 14

Multiple Choice

Which of the following statements concerning liquidity and debt is true?

• A) The greater the use of short-term debt, the lower the risk of illiquidity.
• B) Long-term debt is generally less costly than short-term debt.
• C) A firm can reduce its risk for illiquidity by shifting from short-term debt to long-term debt.
• D) The risk of illiquidity does not depend on the mix of short-term versus long-term debt.

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Definitions:

Day-to-day Expenses

Regular and routine expenses that are necessary for the daily operations of an individual or organization, such as groceries or office supplies.

Major Purpose

The primary reason or objective behind an action, strategy, or existence of an entity or project.

Strategic Plans

Long-term organizational plans that outline goals, objectives, and actions designed to achieve a competitive advantage and meet stakeholders' expectations.

Financial Plans

Detailed documents that outline an individual's or organization's present financial situation, future goals, and strategies to achieve those goals, including budgeting, investments, and risk management.