If Management Expects Interest Rates to Rise and Credit to Tighten

question 55

Multiple Choice

If management expects interest rates to rise and credit to tighten in the near future, it should consider

• A) increasing its use of commercial paper and loans secured by current assets.
• B) decreasing the use of spontaneous financing.
• C) decreasing the level of permanent financing.
• D) increasing the level of permanent financing.

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Definitions:

Own Capital

The personal resources that an investor or business owner invests into a business venture.

Economic Costs

Total expenses incurred in the production of goods and services, including both explicit and implicit costs.

Own Capital

The funds or assets owned by a business or individual, invested to start or operate a business.

Long Run

A period of time in which all factors of production and costs are variable, allowing firms to adjust all inputs in response to market changes.