A large, well-established company with an impeccable financial record considers borrowing money to meet its short-term financing needs. The company hopes to borrow money using _________ since this form of financing typically carries a lower interest rate than that than commercial banks charge on short-term loans.
A)corporate bonds
B)factoring
C)commercial paper
D)trade credit

Question

Quizplus · Accepted Answer

Commercial paper is a short-term unsecured promissory note issued by corporations to borrow money. Since the large, well-established company has an impeccable financial record, it is likely to be viewed favorably by investors who may invest in their commercial paper. This form of financing typically carries a lower interest rate than that than commercial banks charge on short-term loans. Therefore, commercial paper is an attractive option for a financially stable company looking to finance its short-term needs.

A Large, Well-Established Company with an Impeccable Financial Record Considers