Answer:
The correct answer is A) True
Explanation:
Seasonal needs are short-term in nature. To service them using short-term funds would prove more expensive over the long run.
Long-term finance in most cases have the characteristics of being relatively cheaper than short-term finance.
Chief among the sources of short-term finance are:
- trade credits,
- Commercial Bank overdrafts
- Commercial paper, promissory note, and
- loans that are secured
Short-term finances are usually less than a year. Whilst long-term finances generally span over one year.
Examples of long term finances are:
- Equity Capital
- government debt
- Bonds
- Mortgages etc
Interest payable on long term debts are usually single-digit whilst those on short term loans are usually double-digit.
As indicated in the information provided, companies that keep extra "permanent" funds preserve its value by placing it in short term investments
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