Although short-term interest rates have historically averaged less than long-term rates,the heavy use of short-term debt is considered to be an aggressive working capital strategy because of the inherent risks of using short-term financing.

Question

Quizplus · Accepted Answer

The statement is true. While short-term interest rates have generally been lower than long-term rates, relying heavily on short-term debt can be risky due to the potential for interest rate fluctuations and difficulty in obtaining new financing if the short-term debt suddenly cannot be renewed or rolled over.

Although Short-Term Interest Rates Have Historically Averaged Less Than Long-Term