The principle of maturity matching suggests that [blank].
A)machinery with a five-year economic life be financed with debt that will be paid off in five years or less
B)seasonal peaks in inventory be financed with traded credit
C)the minimum level of current assets required for the firm's year around operations be financed with permanent sources
D)all of the above

Question

Quizplus · Accepted Answer

The principle of maturity matching, also known as the matching principle of finance, suggests that the duration of assets should match the duration of the financing. Therefore, all the options provided (A, B, C) are correct applications of this principle. Option A matches the life of machinery with the term of the debt, option B suggests using short-term financing for seasonal inventory needs, and option C recommends using long-term financing for permanent needs in current assets.

The Principle of Maturity Matching Suggests That [Blank]