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    Risk of short term vs. long term credit

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    From the standpoint of the borrower, is long-term or short-term credit riskier? Explain. Would it ever make sense to borrow on a short-term basis if short-term rates were above long-term rates?

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    Solution Preview

    Short-term finance decisions are called working capital management The current assets of the firm such as receivables, inventory etc can be financed by the long term finance or short term liabilities known as current liabilities.

    The goal of Working capital management is to ensure ...

    Solution Summary

    This solution explains why either short term or long term credit is a risker with a given circumstance.