When product demand is high, firms following a middle-of-the-road policy for long- versus short-term financing will:

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When product demand is high, firms following a middle-of-the-road policy for long- versus short-term financing will borrow short-term. This is because short-term financing allows the firm to quickly access funds to meet the surge in demand without committing to long-term debt, which may not be necessary if the high demand is temporary. Additionally, short-term financing options such as lines of credit or commercial paper tend to have lower interest rates compared to long-term debt, which can lower overall financing costs.

When Product Demand Is High, Firms Following a Middle-Of-The-Road Policy