Short-term financing is riskier than long-term financing since, during periods of tight credit, the firm may not be able to rollover (renew)its debt.This is especially true if the funds are used to finance long-term assets rather than short-term assets.

Question

Quizplus · Accepted Answer

Short-term financing typically has a shorter repayment period and may have higher interest rates compared to long-term financing. This makes it riskier, especially during times of tight credit when it may be difficult to renew or roll over the debt. If the funds obtained through short-term financing are used to finance long-term assets, the risks increase further.

Short-Term Financing Is Riskier Than Long-Term Financing Since, During Periods