Although short-term interest rates have historically averaged less than long-term rates, the heavy use of short-term debt is considered to be an aggressive current operating asset financing strategy because of the inherent risks of using short-term financing.

Question

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This statement is true. While short-term interest rates tend to be lower than long-term rates, relying heavily on short-term debt can be risky because it leaves the company vulnerable to interest rate fluctuations and the need to constantly refinance its debt.

Although Short-Term Interest Rates Have Historically Averaged Less Than Long-Term