Final answer:
The ratio of long-term financing to short-term financing is greatly influenced by the term structure of interest rates.
Step-by-step explanation:
The statement that the ratio of long-term financing to short-term financing is greatly influenced by the term structure of interest rates is True.
The term structure of interest rates refers to the relationship between interest rates and the time to maturity of debt. When long-term interest rates are higher than short-term interest rates, it encourages businesses to use short-term financing (such as short-term loans or lines of credit) instead of long-term financing (such as issuing bonds).
For example, if a company expects interest rates to rise in the future, it may opt for short-term financing to avoid being locked into higher interest rates for a long period. On the other hand, when long-term interest rates are lower than short-term interest rates, it incentivizes businesses to use long-term financing to take advantage of lower borrowing costs over a longer period.