Which Statement Best Describes Short-Term Versus Long-Term Financing

question 18

Multiple Choice

Which statement best describes short-term versus long-term financing?

• A)Flexibility is an advantage of short-term credit, but this is somewhat offset by the high flotation costs associated with the need to repeatedly renew short-term credit.
• B)A short-term loan can usually be obtained more quickly than a long-term loan, but the penalty for early repayment of a short-term loan is normally significantly higher than that for a long-term loan.
• C)The flexibility, cost, and riskiness of short-term versus long-term credit are dependent on the type of credit that is actually used.
• D)Short-term debt is often less costly than long-term debt, and the major reason for this is that short-term debt exposes the borrowing firm to much less risk than long-term debt.

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Definitions:

Developing Countries

Nations with relatively lower levels of industrialization, lower standards of living, and often a lower Human Development Index (HDI) compared to developed countries.

Direct Cash Transfers

A form of financial aid where money is given directly to individuals, typically by the government, without any intermediary goods or services.

Conditional Cash

Money awarded or transferred under specific conditions or requirements, often used in social programs to encourage positive behaviors.

Unproductive Spending

Expenses that do not contribute to the growth or productivity of an economy, often seen as wasteful or inefficient.