Question

When debt is used to finance the purchase of assets, the term or time span of the debt should always be shorter than the life span of the assets.

Answer 1

The Statement is TRUE

Explanation:

1) In the question, it is given that debt is taken to finance the purchase of assets. It is Called as Debt Financing.

2) Usually providers of debt finance gives time span of debt repayment shorter than life span of assets because assets will acts as securities to them in case of default

3) There always provide time span less than asset life in order to over come the risk of debt collection from clients.

4) So, Based on that we can say that above statement is true.