Why would a firm generally choose to finance temporary assets with short-term debt?

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Here is the solution for Why would a firm generally choose to finance temporary assets with short-term debt?. The solution is given after the options.

Why would a firm generally choose to finance temporary assets with short-term debt?

Matching the maturities of assets and liabilities reduces risk.

Short-term interest rates have traditionally been more stable than long-term interest rates.

A firm that borrows heavily long term is more apt to be unable to repay the debt than a firm that borrows heavily short term.

Financing requirements remain constant.

Correct Answer

Matching the maturities of assets and liabilities reduces risk.

Explanation:

Matching the maturities of assets and liabilities reduces risk. is the answer for Why would a firm generally choose to finance temporary assets with short-term debt?

Conclusion:

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