Disadvantages of using current liabilities as opposed to long-term debt include [blank].
A)greater risk of illiquidity
B)uncertainty of interest costs
C)higher cash flow exposure
D)both A and B

Question

Quizplus · Accepted Answer

Choosing current liabilities over long-term debt can increase the risk of illiquidity because these liabilities must be paid back within a year and may strain the company's cash flow. Additionally, interest costs for current liabilities tend to be uncertain, which could lead to unexpected expenses. Choosing current liabilities over long-term debt increases both of these risks.

Disadvantages of Using Current Liabilities as Opposed to Long-Term Debt