A firm should choose to borrow using accounts payable only if trade credit is the cheapest source of funding.

Question

Quizplus · Accepted Answer

A firm should always consider the cost of capital before choosing any source of funding. If trade credit is cheaper than other sources of borrowing, then it would be a viable option for the firm. However, if other sources like bank loans or bonds have a lower cost of capital than accounts payable, then the firm should opt for those instead.

A Firm Should Choose to Borrow Using Accounts Payable Only