PRC-3 · Chapter 4 · Question 21 of 65
A firm needs funding for a new 10-year infrastructure project. Which of the following would be an inappropriate method of financing this long-term asset?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Using a short-term 6-month bank overdraft
Explanation
Using short-term finance for long-term projects creates an asset-liability mismatch, exposing the firm to severe liquidity risks.
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