Which of the following statements is FALSE?
A)By relying on short-term debt the firm exposes itself to funding risk,which is the risk of incurring financial distress costs should the firm not be able to refinance its debt in a timely manner or at a reasonable rate.
B)An ultra-conservative policy would involve financing even some of the plant,property,and equipment with short-term sources of funds.
C)With a conservative financing policy,the firm would use short-term debt very sparingly to meet its peak seasonal needs.
D)Short-term debt can have lower agency and "lemons" costs than long-term debt,and an aggressive financing policy can benefit shareholders.

Question

Quizplus · Accepted Answer

An ultra-conservative policy would not involve financing plant, property, and equipment with short-term sources of funds as it would expose the firm to funding risk. An ultra-conservative policy would involve financing only short-term needs with short-term sources of funds.

Which of the Following Statements Is FALSE