the yield curve is upward sloping, then short-term debt will be cheaper than long-term debt Thus, if a firm's CFO expects the yield curve to continue to have an upward slope, this would tend to cause the current ratio to be relatively low, other things held constant.

Question

Quizplus · Accepted Answer

If short-term debt is cheaper than long-term debt, the firm may prefer to use more short-term debt to finance its current assets, leading to a relatively lower current ratio.

The Yield Curve Is Upward Sloping, Then Short-Term Debt Will