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

question 57

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 generally have lower interest expense.
• C) improves the leverage ratio.
• D) violates the principle of matched maturities.

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Definitions:

Formal Authority

The power granted to an individual or group through official or legal means within an organization or society.

Rewards and Punishments

Mechanisms intended to influence behavior by providing positive or negative consequences for actions.

Upward and Lateral Influence

Involves the ability to affect decision-making processes and outcomes within an organization, not only vertically in the hierarchy but also horizontally across departments.

Satisfactory Benefits

Perks or compensations provided by employers that meet or exceed the expectations of employees, contributing to job satisfaction and retention.