The Aggressive Financing Strategy Is Risky in Two Aspects: a Firm

question 67

Multiple Choice

The aggressive financing strategy is risky in two aspects: a firm operates with a possibility of ________, and a firm has only a limited amount of ________ capacity.

• A) insolvency; short-term borrowing
• B) interest rate swings; short-term borrowing
• C) low earnings; long-term borrowing
• D) fixed interest rate; long-term borrowing

---

Definitions:

Unregulated Market

A market where the government does not impose price controls, quotas, or other restrictions on the forces of supply and demand.

Deadweight Loss

The diminished economic effectiveness arising from a failure to achieve or the inability to achieve equilibrium for a product or service.

Price Ceiling

A government-imposed limit on how high a price can be charged for a product or service, intended to protect consumers.

Producer Surplus

Producer surplus is the difference between what producers are willing to accept for a good versus what they actually receive, typically due to market price.