Short-term credit, or short-term financing, is any liability that is scheduled for repayment within one year. Among the sources of short-term funds are banks, suppliers, securities firms, and insurance companies. Their securities (or obligations) can take the form of bank loans, trade credit, commercial paper, and accruals. Some types of short-term financing are easier to obtain and manage than others. Financial managers should consider the costs of the various sources of financing as part of a businesss cash management strategy.

The following statement refers to a source of short-term credit. Select the best term to complete the following sentence:

When resources are used and the payment for those resources is delayed, the result is the spontaneous creation of short-term .

Mulder Assemblers Inc. is a manufacturing company. Mulders balance sheet reflects a note payable of $100,000 due in 10 months to U.S. Bank. Which type of financing does the note represent?

Trade credit

Bank loan

Accrual

Commercial paper