Which of the following statements is generally NOT true?
A)A firm should attempt to match the nature of a project with the duration of the financing it needs.
B)Short-term debt usually carries lower interest rates than long-term debt with comparable default risk.
C)Issuing variable rate debt increases financial uncertainty relative to issuing fixed-rate debt.
D)All of the above statements are true.

Question

Quizplus · Accepted Answer

All the statements provided are generally true in the context of financial management and corporate finance. Matching the duration of financing with the nature of the project (A) is a principle of matching, aiming to align the cash flows from an investment with its financing to manage risk. Short-term debt typically does have lower interest rates than long-term debt for comparable risk (B), reflecting the increased risk and uncertainty over longer periods. Issuing variable rate debt does introduce more financial uncertainty compared to fixed-rate debt (C), as payments can fluctuate with changes in interest rates.

Which of the Following Statements Is Generally NOT True