The Risk to the Firm of Borrowing Using Short-Term Credit

question 50

True/False

The risk to the firm of borrowing using short-term credit is usually greater than if it used long-term debt.Added risk stems from (1)the greater variability of interest costs on short-term than long-term debt and (2)the fact that even if its long-term prospects are good, the firm's lenders may not be willing to renew short-term loans if the firm is temporarily unable to repay those loans.

Recognize the impact of consumer protection law on online transactions.

Understand the basic concept of asymmetric information and its impact on market transactions.

Recognize adverse selection and moral hazard problems in various markets.

Identify mechanisms like market signaling and government intervention to mitigate asymmetric information issues.

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Definitions:

Respiratory Rate

The number of breaths a person takes per minute, an important vital sign.

Tachypnea

Abnormally fast respirations, usually more than 24 respirations per minute.

Patent Airway

A clear and unobstructed passageway for air to move in and out of the lungs.

Cyanosis

Bluish discoloration of skin and mucous membranes caused by reduced oxygen in blood