Which of the following is more likely for a firm practicing the "relaxed" strategy of long- versus short-term borrowing at the height of sales demand?

Question

Quizplus · Accepted Answer

If a firm is practicing a "relaxed" strategy of long- versus short-term borrowing at the height of sales demand, it is likely that they will not want to take on too much short-term debt as this could lead to liquidity issues if sales demand drops. Investing heavily in marketable securities may also not be a suitable strategy as they may not yield enough returns to cover all capital requirements. Therefore, borrowing heavily on a long-term basis and matching the financing with capital requirements is a more likely strategy for this firm.

Which of the Following Is More Likely for a Firm