Self liquidating paper theory
A firm will usually increase the ratio of short-term debt to long-term debt when A.
no general relationship between short- and long-term rates. intermediate rates (one to five years) lower than both short-term and long-term rates.
Some analysts believe that the term structure of interest rates is determined by the behavior of various types of financial institutions. A “normal” term structure of interest rates would depict A. short-term debt has a lower cost than long-term equity. the term structure is inverted and expected to shift down. the term structure is upward sloping and expected to shift up. the firm is undertaking a large capital budgeting project. If a firm uses level production with seasonal sales A. low inventories due to computer inventory management. fluctuating production to match sales and seasonal sales.
the working capital associated with a product will be liquidated within a one-year period. all the product will be sold, receivables collected, and bills paid over the time period specified. assets associated with the production of a product will be liquidated over the depreciable life of the assets. self-liquidating assets will be financed by long-term sources of capital.