Which of the Following Statements Is Correct

question 120

Multiple Choice

Which of the following statements is correct?

• A) Under normal conditions,a firm's expected ROE probably would be higher if it financed with short-term than with long-term debt,but the use of short-term debt would probably increase the firm's risk.
• B) Conservative firms generally use no short-term debt and thus have zero current liabilities.
• C) A short-term loan can usually be obtained more quickly than a long-term loan,but the cost of short-term debt is likely to be higher than that of long-term debt.
• D) If a firm that can borrow from its bank buys on terms of 2/10,net 30,and if it must pay by Day 30 or else be cut off,then we would expect to see zero accounts payable on its balance sheet.
• E) If one of your firm's customers is "stretching" its accounts payable,this may be a nuisance but does not represent a real financial cost to your firm as long as the firm periodically pays off its entire balance.

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Definitions:

Chronology

The arrangement of events or dates in the order of their occurrence.

Conclusion

The final part of a document or speech that summarizes key points or presents a final judgment or decision.

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