In general,the greater a firm's reliance upon short-term debt or current liabilities,the lower the
A)liquidity.
B)flexibility.
C)certainty of interest costs.
D)both A and C.

Question

Quizplus · Accepted Answer

A firm's reliance on short-term debt or current liabilities indicates that they have to repay these obligations in the near future. This reduces their liquidity - the ability to meet its short-term debts and obligations with available resources. As a result, the firm becomes more vulnerable to financial difficulties and may find it difficult to meet future obligations, including interest costs. Therefore, the greater the reliance on short-term debt or current liabilities, the lower the liquidity and the certainty of interest costs.

In General,the Greater a Firm's Reliance Upon Short-Term Debt or Current