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:

Cost Of Goods Sold

The direct costs attributable to the production of the goods sold by a company, including materials and labor costs.

Use Of Cash

A summary of how a company's cash is being utilized in operations, investments, and financing activities.

Accounts Payable

Represents money owed by a company to its creditors for goods and services purchased on credit.

Accounts Receivable

Payments due to a business by its customers for products or services that have been dispatched or exploited, yet are still unpaid.