The most common way to finance a temporary cash deficit is with a:
A) long-term secured bank loan.
B) short-term secured bank loan.
C) short-term issue of corporate bonds.
D) long-term unsecured bank loan.
E) short-term unsecured bank loan.

Question

Quizplus · Accepted Answer

The best choice to finance a temporary cash deficit is a short-term unsecured bank loan because it provides the necessary funds without requiring collateral and can be paid back within a short period of time. Long-term loans are not appropriate for temporary cash deficits because they are meant for longer-term investments, and requiring collateral limits the flexibility of the borrower. Similarly, the issuance of corporate bonds is a long-term financing option and would be more appropriate for larger investments.

The Most Common Way to Finance a Temporary Cash Deficit