If a Firm Relies on Short-Term Debt or Current Liabilities

question 35

Multiple Choice

If a firm relies on short-term debt or current liabilities in financing its asset investments,and all other things remain the same,what can be said about the firm's liquidity?

• A) The firm will be relatively more liquid.
• B) The firm will be relatively less liquid.
• C) The liquidity of the firm will be unchanged.
• D) The firm will be more liquid only if interest rates are below the company's weighted average cost of capital.

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Definitions:

Carbohydrates

Organic compounds, including sugars, starch, and cellulose, which are an important source of energy for the body; found in a variety of foods.

Butter

A dairy product made from churning milk or cream, commonly used as a spread or cooking ingredient, known for its rich flavor and high-fat content.

Thiamine

A vitamin belonging to the B complex (Vitamin B1), essential for glucose metabolism and plays a key role in nerve, muscle, and heart function.

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