Which statement is correct?

Question

Quizplus · Accepted Answer

The most appropriate financing strategy is to use long-term liabilities, such as bonds and mortgages, to match long-term assets, such as property, plant, and equipment. This ensures that the company is not relying on short-term financing sources to fund long-term investments, which could lead to liquidity problems if these short-term sources dry up or become more expensive. Using short-term liabilities to finance long-term assets is generally not advisable, as it can create a liquidity squeeze and increase the risk of default if the company is unable to roll over or repay the short-term debt. Therefore, Option B is the correct choice.

Which Statement Is Correct