Which of the Following Statements Is FALSE

question 33

Multiple Choice

Which of the following statements is FALSE?

• A)Financing part or all of the permanent working capital with short-term debt is known as an aggressive financing policy.
• B)When the yield curve is downward sloping,the interest rate on short-term debt is lower than the rate on long-term debt.In that case,short-term debt may appear cheaper than long-term debt.
• C)The value of short-term debt is less sensitive to the firm's credit quality than long-term debt;therefore,its value will be less affected by management's actions or information.
• D)Permanent working capital is the amount that a firm must keep invested in its short-term assets to support its continuing operations.

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Definitions:

Dividend

A portion of a company's earnings distributed to its shareholders, usually in the form of cash or additional stock.

Partnership Accounting

The process of managing and recording the financial activities, transactions, and interests of partners within a business partnership.

Drawing Account

An account that tracks the money or goods withdrawn from a business by its owners for personal use.

Capital Account

A financial statement that shows the changes in ownership interest of a company over a period.