Short-term debt while often cheaper than long-term debt

Reference no: EM13599634

1. Which of the following statements is most correct?
a. Permanent current assets are those current assets that must be increased when sales increase during an upswing.
b. Temporary current assets are those current assets on hand at the low point of the business cycle.
c. Maturity matching is considered an aggressive financing policy.
d. An aggressive current asset financing policy uses a minimum amount of short-term debt.
e. None of the statements above is correct.

2.Which of the following statements concerning commercial paper is incorrect?
a. Commercial paper is generally written for terms less than 270 days.
b. Commercial paper generally carries an interest rate below the prime rate.
c. Commercial paper is sold to money market mutual funds, as well as to other financial institutions and nonfinancial corporations.
d. Commercial paper can be issued by virtually any firm so long as it is willing to pay the going interest rate.
e. Commercial paper is a type of unsecured promissory note issued by large, strong firms.

3. Which of the following statements is most correct?
a. Trade credit is provided to a business only when purchases are made.
b. Commercial paper is a form of short-term financing that is primarily used by large, financially stable companies.
c. Short-term debt, while often cheaper than long-term debt, exposes a firm to the potential problems associated with rolling over loans.
d. Statements b and c are correct.
e. All of the statements above are correct.

Reference no: EM13599634

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