13. Short-term versus long-term financing AaAa Generally speaking, short-term debt is riskier than long-term debt, but it also has some advantages. In the following table, identify which type of funding (short-term debt or long-term debt) is being described in each case. Short-term Debt Long-term Debt This loan has more covenants that restrict the firm's actions. This loan is more flexible and can be used to adapt to changing market conditions The lender will insist on a more thorough financial examination before extending this kind of credit. Suppose you are running a firm that needs to raise capital today and you are choosing between short-term and long-term debt. The firm does not currently have a strong enough cash flow to fund new operations internally, but you expect that this situation will soon change and the firm's need for external funds will diminish. Which funding source is likely best for your firm? O Long-term debt Short-term debt