The Risk to the Firm of Borrowing Using Short-Term Credit

question 28

True/False

The risk to the firm of borrowing using short-term credit is usually greater than if it used long-term debt.Added risk stems from (1)the greater variability of interest costs on short-term than long-term debt and (2)the fact that even if its long-term prospects are good,the firm's lenders may not be willing to renew short-term loans if the firm is temporarily unable to repay those loans.

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Definitions:

Diffusion of Innovation

The process by which a new idea, product, or behavior spreads through a population, influencing the adoption rate and market saturation.

Early Adopters

A group within a consumer base that is among the first to acquire and use a new product or technology, often influencing others.

Diffusion of Innovation

The process by which a new idea, product, or practice spreads within a society or from one society to another, often influenced by factors like social networks and communication.

Product Adopters

Individuals or entities that purchase or use new products soon after they are launched, often categorized into groups based on adoption timing.