Which of the Following Statements Is Correct

question 157

Multiple Choice

Which of the following statements is correct?

• A) Under normal conditions,the shape of the yield curve implies that the interest cost of short-term debt is greater than that of long-term debt,although short-term debt has other advantages that make it desirable as a financing source.
• B) Flexibility is an advantage of short-term credit but this is somewhat offset by the higher flotation costs associated with the need to repeatedly renew short-term credit.
• C) A short-term loan usually can be obtained more quickly than a long-term loan but the penalty for early repayment of a short-term loan is significantly higher than for a long-term loan.
• D) Statements about the flexibility,cost,and riskiness of short-term versus long-term credit are dependent on the type of credit that actually is used.
• E) Short-term debt is often less costly than long-term debt and the major reason for this is that short-term debt exposes the borrowing firm to much less risk than long-term debt.

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Definitions:

Intangible

Refers to something that cannot be physically touched or measured, such as services, intellectual property, or goodwill.

Method of Delivery

Refers to the way in which goods or services are provided to the customer, including physical delivery, digital delivery, or in-person service.

Idle Capacity

Unused productive ability within a business, often resulting in inefficiency because resources are not being utilized to generate revenues.

Classification

A method of arranging entities in an organized system of categories.