The Principle of Matched Maturities in Finance Refers To

question 55

Multiple Choice

The principle of matched maturities in finance refers to:

• A) finding sources of funds with the longest maturity, in order to avoid liquidity crises.
• B) funding long-term assets with long-term sources and short-term assets with short-term financing.
• C) using as much short-term financing as possible due to the lower cost of interest.
• D) buying marketable securities when demand is high and borrowing short-term when demand is low.

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Definitions:

Factory Overhead

All indirect costs associated with the production process, such as utilities, maintenance, and management salaries.

Machine Hours

A measure of the actual time a machine is operated, used in calculating manufacturing costs and setting factory overhead rates.

Overapplied Amount

This is an accounting term referring to a situation where the actual manufacturing overhead cost is less than the overhead cost applied to production, resulting in a surplus.

Factory Overhead

All indirect costs associated with manufacturing, including utilities, indirect labor, and materials not directly traceable to a product.