A Firm Will Usually Increase the Ratio of Short-Term Debt

question 48

Multiple Choice

A firm will usually increase the ratio of short-term debt to long-term debt when

• A) short-term debt has a lower cost than long-term equity.
• B) the term structure is inverted and expected to shift down.
• C) the term structure is upward sloping and expected to shift up.
• D) the firm is undertaking a large capital budgeting project.

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Definitions:

Financial Statements

Reports that summarize the financial performance, position, and cash flows of a business over a specific period of time.

Internal Control Procedures

These are policies and procedures put in place by a company to ensure the integrity of financial and accounting information, promote accountability, and prevent fraud.

Cash Short and Over

An account that stores any discrepancies between the expected cash count and the actual amount of cash present, reflecting errors or theft.

Other Income

Revenue generated from activities that are not part of a company's primary business operations, including interest, dividends, and gains from asset sales.