Firms Generally Choose to Finance Temporary Assets with Short-Term Debt

question 51

Multiple Choice

Firms generally choose to finance temporary assets with short-term debt because

• A) Matching the maturities of assets and liabilities reduces risk.
• B) Short-term interest rates traditionally have been more stable than long-term interest rates.
• C) A firm that borrows heavily long-term is more apt to be unable to repay the debt than the firm that borrows heavily short-term.
• D) The yield curve traditionally has been downward sloping.
• E) Sales remain constant over the year,and financing requirements also remain constant.

Recognize progress indicators in an Earth-sustaining economy.

Analyze the effectiveness and shortcomings of various pollution control approaches in internalizing external costs.

Evaluate the impact of environmental regulation on businesses.

Identify strategies that governments of developing countries can use to reduce poverty.

---

Definitions:

Fixed Manufacturing Overhead

Costs associated with manufacturing that do not vary with the level of production, such as salaries of managers and rent for the factory.

Cash Disbursements

The outflow of cash for expenses, investments, and other business activities as recorded in the entity's financial records.

Variable Selling

Costs that vary directly with the volume of sales, including commissions and shipping fees.

Administrative Expense

Costs related to the general operations of a business that are not directly tied to the production of goods or services.