A 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

This statement is true because a firm that uses primarily short-term credit to finance its current assets would have to continually renegotiate and renew its credit agreements, which would expose it to fluctuations in interest rates more than a firm that has locked in long-term financing.

A Firm That Follows an Aggressive Current Asset Financing Approach