firm that follows an aggressive current asset financing approach uses primarily short-term credit and thus is more exposed to an unexpected increase in interest rates than is a firm that uses long-term capital and thus follows a conservative financing policy.

Question

Quizplus · Accepted Answer

A firm that relies on short-term credit to finance its current assets will be more vulnerable to fluctuations in interest rates compared to a firm that uses long-term capital. This is because short-term loans need to be renewed frequently, which means the interest rates can change frequently. Long-term loans, on the other hand, have a fixed interest rate, which brings stability to the firm's financial structure. Thus, the statement is true.

Firm That Follows an Aggressive Current Asset Financing Approach Uses