Which of the following statements is CORRECT?
A) Trade credit is provided only to relatively large,strong firms.
B) Commercial paper is a form of short-term financing that is primarily used by large,strong,financially stable companies.
C) Short-term debt is favored by firms because,while it is generally more expensive than long-term debt,it exposes the borrowing firm to less risk than long-term debt.
D) Commercial paper can be issued by virtually any firm so long as it is willing to pay the going interest rate.
E) Commercial paper is typically offered at a long-term maturity of at least five years.

Question

Quizplus · Accepted Answer

Commercial paper is indeed a form of short-term financing that is primarily used by large, strong, financially stable companies. This is because commercial paper is an unsecured promissory note that is not backed by collateral, so investors rely solely on the issuer's financial health and creditworthiness when deciding whether to invest. Therefore, larger, financially stronger companies are considered less risky and more likely to be approved for commercial paper issuance.

Which of the Following Statements Is CORRECT