The more short-term financing relative to long-term financing, the more risky the financial structure.

Question

Quizplus · Accepted Answer

Short-term financing typically has higher interest rates and requires regular refinancing, which can lead to cash flow issues and potential default if the company is unable to secure new financing. Long-term financing, on the other hand, provides stable funding over a longer period of time and can reduce risk. Therefore, a higher proportion of short-term financing in the financial structure increases the risk of the company.

The More Short-Term Financing Relative to Long-Term Financing, the More