Which of the following working capital financing policies subjects the firm to the greatest risk?

A) Financing temporary working capital with long-term debt
B) Financing permanent working capital with long-term debt
C) Financing permanent working capital with short-term debt
D) Financing temporary working capital with short-term debt

Financing permanent working capital with short-term debt subjects the firm to the greatest risk because short-term debt has to be repaid within a year, whereas permanent working capital needs financing for a longer-term. Thus, there will be a constant need for short-term financing which increases the risk of not being able to secure it when needed. This can result in default or bankruptcy for the firm.