The Risk to the Firm of Borrowing Using Short-Term Credit

question 134

True/False

The risk to the firm of borrowing using short-term credit is usually greater than with long-term debt. Added risk stems from greater variability of interest costs on short-term debt. Even if its long-term prospects are good, the firm's lender may not renew a short-term loan if the firm is even only temporarily unable to repay it.

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Definitions:

Thoracic Aorta

A section of the aorta, the major artery in the body, passing through the thoracic cavity and supplying oxygenated blood to the thoracic and upper abdominal organs.

Superior Mesenteric Vein

A large vein that drains blood from the small intestine, ascending colon, and part of the transverse colon into the portal vein.

Gastrosplenic Vein

A blood vessel that drains blood from the stomach and spleen into the hepatic portal vein.

Lumbar Vein

A vein that drains the posterior abdominal wall and the spinal cord in the lumbar region.