Firms generally choose to finance temporary current assets with short-term debt because
A. matching the maturities of assets and liabilities reduces risk under some circumstances, and also because short-term debt is often less expensive than long-term capital.
B. short-term interest rates have traditionally been more stable than long-term interest rates.
C. a firm that borrows heavily on a long-term basis is more apt to be unable to repay the debt than a firm that borrows short term.
D. the yield curve is normally downward sloping.
E. short-term debt has a higher cost than equity capital.
Answer: A
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