Cash flows from operations may not be sufficient for a firm to keep up with growth-related
financing needs, or the firm may not be able to always generate enough cash flow to maintain a
surplus of cash. Firms prefer to borrow now to fulfill their capital requirements through means of
short-term financing or long-term financing. Both methods have their advantages and
disadvantages. The following statement identifies a possible characteristic of short-term financing.
Consider this case: Interest rates on short-term loans are more stable than long-term loans.
Identify whether the preceding statement is true or false. This statement is false. This statement is
true. Firms use a variety of short-term financing sources to support working capital. Use the
descriptions in the following table to identify the short-term financing source. Description Short-
Term Financing Source Liabilities that arise from purchases from suppliers made on credit. An
obligation backed by collateral, often inventories or accounts receivable..
Cash flows from operations may not be sufficient for a firm .pdf
1. Cash flows from operations may not be sufficient for a firm to keep up with growth-related
financing needs, or the firm may not be able to always generate enough cash flow to maintain a
surplus of cash. Firms prefer to borrow now to fulfill their capital requirements through means of
short-term financing or long-term financing. Both methods have their advantages and
disadvantages. The following statement identifies a possible characteristic of short-term financing.
Consider this case: Interest rates on short-term loans are more stable than long-term loans.
Identify whether the preceding statement is true or false. This statement is false. This statement is
true. Firms use a variety of short-term financing sources to support working capital. Use the
descriptions in the following table to identify the short-term financing source. Description Short-
Term Financing Source Liabilities that arise from purchases from suppliers made on credit. An
obligation backed by collateral, often inventories or accounts receivable.
