If we could accurately forecast interest rates, financing decisions would be easy. Although it's difficult to predict future interest rate levels, it is easy to predict that interest rates will fluctuate. Therefore, sound financial policy calls for using a mix of long- and short-term debt as well as equity to position the firm so that it can survive in any interest rate environment. The firm's optimal financial policy depends on the nature of the firm's assetsthe easier its assets can be sold, the more feasible it is for the firm to use -Select-shortlongItem 1 -term debt. Consequently, it is logical for a firm to finance current assets with -Select-shortlongItem 2 -term debt and to finance fixed assets with -Select-shortlongItem 3 -term debt.