Managing maturity structure of debt

Along with decisions about optimal debt structure, firms need to decide on the kind of maturities the debt in their capital structure should have. There are several factors that affect the choice of maturity structure.

Based on your understanding of the factors associated with the choice of maturity structure, complete the following sentences:

- If a firm expects earnings to decline in the future, it will likely use _________debt.

A. long-term debt

B. short-term debt

- Suppose a company bought equipment with a 10-year life. If it to debt to finance the equipment, then it would have to pay off its debt short-term with the cash flows generated from______

A. assets other than the equipment

B. this 10-year life equipment

If the amount of financing required is relatively small, the company is likely to get a term loan or a private placement?

A. TRUE B. FALSE