Firms Generally Choose to Finance Temporary Current Assets with Short-Term

question 22

Multiple Choice

Firms generally choose to finance temporary current assets with short-term debt because

• A) matching the maturities of assets and liabilities reduces risk under some circumstances,and also because short-term debt is often less expensive than long-term capital.
• B) short-term interest rates have traditionally been more stable than long-term interest rates.
• C) a firm that borrows heavily on a long-term basis is more apt to be unable to repay the debt than a firm that borrows short term.
• D) the yield curve is normally downward sloping.
• E) short-term debt has a higher cost than equity capital.

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Definitions:

Placebo

An inert substance or treatment given to a control group in experiments to compare effects with those of actual treatments.

Vaccinated

The state of having received a vaccine to produce immunity against a specific disease.

Blood Type

A system for identifying blood types through the detection or nondetection of inherited antigens on the surfaces of red blood cells.

Association

A statistical relationship between two or more variables, indicating how changes in one variable are connected with changes in another.