Fine Art Framing wanted to spur business, so it ran a three-month stretch of promotions where customers were given six months with zero interest and no payments. Unfortunately, the company found itself short on money as it waited for payments to roll in, so it was forced to borrow money from the bank to stay in business. Which of the reasons firms borrow money does thisbest demonstrate?
A) funds for extending credit
B) funds for trade credit
C) funds for keeping enough product available
D) funds for capital leverage
E) funds for managing everyday business activities

Question

Quizplus · Accepted Answer

Fine Art Framing needed to borrow money to cover the gap created by offering customers a period of zero interest and no payments, which is an example of borrowing funds to extend credit to customers.

Fine Art Framing Wanted to Spur Business, So It Ran