Why Do Firms Generally Choose to Finance Temporary Net Operating

question 7

Multiple Choice

Why do firms generally choose to finance temporary net operating working capital with short-term debt?

• A)Matching the maturities of assets and liabilities reduces risk.
• 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 has traditionally been downward sloping.

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