Why Would a Firm Ever Use Short-Term Debt to Finance

question 63

Multiple Choice

Why would a firm ever use short-term debt to finance permanent current assets?

• A)This would be illogical and is rarely observed.
• B)This would occur if short-term rates were much lower than long-term rates.
• C)This would only occur if the managers were very conservative.
• D)None of these.

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Definitions:

Uniform Partnership Act

A statute that sets standard rules for the formation and operation of partnerships in the United States to ensure consistency and fairness.

Limited Liability Companies

A commercial entity that unites the individual or partnership tax pass-through with the corporation's benefit of limited liability.

Members

Owners of a limited liability company.

Articles of Organization

Legal documents filed with a state government to officially start a limited liability company (LLC) and outline its structure and operation.