If management expects interest rates to rise and credit to tighten in the near future, it should consider
A) increasing its use of commercial paper and loans secured by current assets.
B) decreasing the use of spontaneous financing.
C) decreasing the level of permanent financing.
D) increasing the level of permanent financing.

Question

Quizplus · Accepted Answer

If management anticipates a rise in interest rates and tighter credit conditions, it would be prudent to increase the level of permanent financing. This approach locks in current, potentially lower interest rates for a longer period, reducing the risk associated with refinancing in a higher interest rate environment.

If Management Expects Interest Rates to Rise and Credit to Tighten