Chapter 6 T/F

A "risky" financial plan will use long-term financing for fixed assets, permanent current assets, and a portion of temporary current assets.

False

According to the expectations hypothesis, when long-term interest rates are higher than short-term interest rates, long-term rates are expected to decline.

False

Ideally, permanent current assets should be financed exclusively with short-term borrowings.

False

It is not necessary to understand interest rate movements when deciding the structure of short-term debt relative to long-term debt.

False

Liquidating current assets is like liquidating fixed assets since they have lives greater than one year.

False

Long-term financing is usually less expensive than short-term financing because firms have longer periods of time to pay off long-term debt.

False

Working capital management is relatively unimportant for a small business.

False

During tight money periods, short-term financing may be difficult to find.

True

Increased use of long-term financing is generally a more conservative approach to current asset financing.

True

One of the primary benefits of implementing supply chain management is reducing inventory on hand.

True

The "term structure of interest rates" refers to the relationship between yields on debt and their maturities.

True

The cash budget combines the cash receipts and cash payments schedules in determining cash flow.

True

The three most important factors when selecting a financing plan are risk, asset liquidity, and timing.

True