A company decreases the risk of insolvency by financing long-term assets with short-term debt.

Name: A company decreases the risk of insolvency by financing long-term assets with short-term debt.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

Financing long-term assets with short-term debt increases the risk of insolvency as the company may not have sufficient cash flow to repay the debt when it becomes due. Long-term assets should be financed with long-term debt or equity.

A Company Decreases the Risk of Insolvency by Financing Long-Term