[whopper]

Q. Why would a company use short term loans to retire a long-term bond?

A. Interest rates have declined over the last 5 years.

My Question. Since LT interest is usually higher than ST interest rates, wouldn’t the company be better off leaving the debt financing ‘as is’?

REG - 89, 04/29/13
BEC - 81, 08/06/13
FAR - 84, 12/19/13
AUD - 82, 10/05/13

[Jennifer241]

Interest rates declining over a 5 year time frame is usually pretty significant to make taking the short term interest rate more appealing than the long term.

AUD - Jan 9,13 Pass
REG - Aug 30,13 Pass
BEC - Oct 26,13 Pass
FAR - Dec 4,13 Pass

Licensed CPA in the state of Oregon

[Author]

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