Asked by
Adamari Arenas
on Dec 01, 2024
Verified
There is more risk associated with short-term debt than long-term debt because of:
A) uncertainty arising from interest rate fluctuations.
B) the risk of being unable to refund the debt.
C) relatively high cost of short-term debt.
D) a and b
Short-Term Debt
Short-Term Debt is borrowed money that a company must repay within the short term, typically within a year, often used for operational expenses.
Interest Rate Fluctuations
Changes in the interest rate over time, affecting borrowing costs, savings rates, and investment returns.
Refund Risk
The risk that a debt issuer will repay borrowed funds before the maturity date, typically in a declining interest rate environment.
- Understand the sources of short-term financing and their costs.
- Acknowledge the importance of proactive working capital policies and the potential dangers they pose.
Verified Answer
JA
Learning Objectives
- Understand the sources of short-term financing and their costs.
- Acknowledge the importance of proactive working capital policies and the potential dangers they pose.