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

question 6

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 the options.

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Definitions:

Industrialize

The process by which a society or country transforms itself from a primarily agricultural society into one based on the manufacturing of goods and services.

Dependency Theory

A perspective that views underdevelopment in poorer nations as a result of their dependence on wealthier countries.

Economic Underdevelopment

A condition where a country or region suffers from poor economic growth and low standards of living due to various structural problems.

Exploitative Relations

Relationships where one party takes unfair advantage of another, often in social, economic, or labor contexts.