The Hedging Principle Implies That Permanent Asset Investments Not Financed

question 25

True/False

The hedging principle implies that permanent asset investments not financed by spontaneous sources should be financed with permanent sources,and temporary investments not financed by spontaneous sources should be financed with temporary sources.

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Definitions:

Target Price

A pre-set price determined by a company or government at which a product, especially in agriculture, is aimed to be sold in the market.

Countercyclical Payment

A fiscal mechanism used to reduce the economic fluctuations by providing economic support during downturns and less support during growth periods.

Price Supports

Government interventions to maintain the market price of a commodity or product at a certain level by buying excess supply or instituting price floors.

Government

The organization or system through which a community, state, or nation is governed, often involving regulations and public services.