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

question 51

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) future interest rates are expected to increase.
• C) long-term debt has a lower cost than long-term equity.
• D) future interest rates are expected to decrease.

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Definitions:

Material Fact

A crucial piece of information that can affect the outcome of a legal decision or the valuation of an investment.

Section 5

Often refers to a specific section of a larger act or law, needing explicit context, such as Section 5 of the Federal Trade Commission Act related to unfair or deceptive acts or practices.

1933 Act

The U.S. Securities Act of 1933, a federal statute that regulates the offer and sale of securities to protect investors by requiring sellers to disclose significant information concerning securities being offered.

Exemption

A release from some burden, duty, or obligation; a grace; a favor; an immunity; taken out from under the general rule, not to be like others who are not exempt.