When a Firm Finances Long-Term Assets with Short-Term Sources of Funding

question 79

Multiple Choice

When a firm finances long-term assets with short-term sources of funding, it:

• A)Reduces the risk of cash shortage
• B)Will have lower interest expense
• C)Improves the leverage ratio
• D)Is ignoring the principle of matched maturities

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Definitions:

Confidence Level

Confidence level indicates the probability that a population parameter will fall between two set values for a certain proportion of times.

Confidence Interval

An array of values, derived from observations of a sample, which is believed to enclose the value of a mystery parameter in the population.

Mean

The arithmetic average of a set of numbers, calculated by dividing the sum of the numbers by the count of numbers.

Confidence Interval

A confidence interval is a range of values derived from sample statistics that is likely to contain the value of an unknown population parameter, with a specified level of confidence.