Your firm borrows money from the bank on a short-term note due in 9 months.This type of financing would be most appropriate for which of the following activities?
A)The support of accounts receivable
B)The construction of a new warehouse
C)The support of accounts payable
D)The financing of new equity

Question

Quizplus · Accepted Answer

Borrowing money on a short-term note due in 9 months is best suited for supporting accounts receivable, as it helps to bridge the gap between the time when cash inflows are received from customers and the time when payments are due to suppliers. This type of financing is not appropriate for the construction of a new warehouse or financing new equity, as these activities require a long-term financing arrangement. It is also not appropriate for the support of accounts payable, which are short-term liabilities that need to be paid off in a timely manner.

Your Firm Borrows Money from the Bank on a Short-Term