2. Current asset policy There are pros and cons to using short-term and long-term financing. A firm's corporate culture and specific situation will drive its decision to use one type over another. Use the following table to select which type of financing a firm is more likely to choose, given its situation. Short-Term Debt Long-Term Debt A firm is worried about a temporary recession in its industry. A firm believes that interest rates will fall. A firm wants to avoid prepayment penalties