If a Firm Relies on Short-Term Debt or Current Liabilities

question 35

Multiple Choice

If a firm relies on short-term debt or current liabilities in financing its asset investments,and all other things remain the same,what can be said about the firm's liquidity?

• A) The firm will be relatively more liquid.
• B) The firm will be relatively less liquid.
• C) The liquidity of the firm will be unchanged.
• D) The firm will be more liquid only if interest rates are below the company's weighted average cost of capital.

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Definitions:

Psychotherapy

The treatment of mental disorder by psychological rather than medical means.

Neuroticism

A personality trait marked by emotional instability, anxiety, moodiness, worry, and fear.

Personality Trait

Enduring characteristics or qualities that describe an individual's consistent manner of behavior, feeling, and thought.

Predisposition

An inclination or tendency to behave in a particular way or to be affected by a particular condition.