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:

Sole Seller

A market condition where only one supplier provides a particular good or service, also known as a monopoly.

Marginal Cost

The investment needed to produce an extra unit of a product or service.

Marginal Revenue

The extra revenue a company earns by selling an additional unit of a product or service.

Barrier to Entry

Factors that prevent or hinder companies from entering a particular market, which might include high startup costs, strict regulations, or strong competition.