Companies often look at short-term debt financing because it is usually easier to obtain than long-term debt financing for three reasons. Which of the following is NOT one of the three reasons?
A) For the lender, the shorter repayment period means less risk of default.
B) Short-term loans look better on the balance sheet than long-term loans.
C) The dollar amounts are usually lower than those of long-term loans.
D) A close working relationship normally exists between the short-term borrower and the lender.

Question

Quizplus · Accepted Answer

Short-term loans do not necessarily look better on the balance sheet than long-term loans. In fact, having a large amount of short-term debt can be seen as a negative signal to investors, as it may indicate that the company is struggling to meet its long-term obligations.

Companies Often Look at Short-Term Debt Financing Because It Is