When the Term Structure of Interest Rates Is Downward Sloping

question 35

Multiple Choice

When the term structure of interest rates is downward sloping and interest rates are expected to decline, the

• A) financial manager generally borrows short-term.
• B) financial manager borrows at the lower long-term rates.
• C) corporation's ratio of short-term to long-term debt is low.
• D) none of these.

---

Definitions:

Deferred Revenue

Money received by a company for goods or services yet to be delivered or performed; classified as a liability on the balance sheet until the transaction is completed.

Product Costs

All costs incurred to acquire or produce a product that is intended for sale, including materials, labor, and overhead.

Sales

The activities involved in selling goods or services to customers for money.

Administrative Expenses

Expenses related to the general operations of a business, such as salaries of executive personnel, accounting, and human resources.