Which of the following is an advantage of utilizing short-term debt to finance the acquisition of short-term assets?
A) Interest rates on short-term debt are usually lower than interest-rates on long-term debt.
B) It exposes the firm to less risk than if the firm were to use long-term debt.
C) It improves the firm's debt ratio.
D) It increases the firm's sustainable growth rate.

Question

Quizplus · Accepted Answer

Utilizing short-term debt to finance the acquisition of short-term assets can be advantageous because interest rates on short-term debt are usually lower than interest rates on long-term debt, resulting in lower interest payments and potentially higher profitability for the firm. However, it also increases the firm's risk and may require frequent refinancing.

Which of the Following Is an Advantage of Utilizing Short-Term