The following questions are true or false

1. Since commercial bank loans are cheaper than trade credit, few firms use trade credit.

_______________

2. The smaller the trade discount, the more expensive is the trade credit.

_______________

3. A change in the trade discount from 2% to 3% encourages the use of trade credit.

_______________

4. Trade credit is primarily used by retailers to finance inventory.

_______________

5. If goods cost $1,000 and the terms of credit are 2/15, n45, the firm does not have to pay until the 45^th day.

_______________

6. One reason why firms use trade credit is that it is a spontaneous source of finance.

_______________

7. When a commercial bank grants a loan, it may decrease the cost of the loan by requiring an origination fee.

_______________

8. Commercial paper is usually secured by inventory.

_______________

9. Only firms with good credit ratings are able to sell commercial paper.

_______________

10. If a firm has an excellent credit rating, it may use commercial paper as a source of long-term finance.