A short-term liability used by a company to finance the purchase of current assets and that is often secured by accounts receivable or inventory is referred to as an):
A)accounts payable.
B)current liability.
C)line of credit.
D)overdraft protection.

Question

Quizplus · Accepted Answer

A line of credit is a type of short-term liability used by a company to finance the purchase of current assets. It is often secured by accounts receivable or inventory, which serves as collateral for the loan. Accounts payable is actually a current liability that represents money owed by a company to its suppliers for goods and services received but not yet paid for. Current liability is a broader term that refers to any debt or financial obligation that must be paid within the current fiscal year. Overdraft protection is a type of short-term loan that protects a bank account from overdraft fees and covers any negative balance in the account up to a certain limit.

A Short-Term Liability Used by a Company to Finance the Purchase