Question
The following questions are true or false 1. Since commercial bank loans are cheaper than trade credit, few firms use trade credit. _______________ 2. The
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 45th 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.
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