Trade Credit:

Provides a firm with a discount for paying an invoice early.

Will always provide a cheaper source of financing as compared to bank financing.

The annual rate is typically higher than the effective rate.

The effective rate can be calculated by taking the daily rate and multiplying by 360.

Is a very common program where a manufacturer provides a short-term loan for a buyers purchase.

Which of the following would decrease the cash conversion cycle?

accept a trade discount.

increase the receivable collection period.

increase the inventory conversion cycle.

increase the payables deferral period.

accept an inventory loan.

With regard to the correct discount rate to use for leasing, which of the following is not a correct statement?

Using the weighted average cost of capital is consistent with the capital budgeting methods previously used.

Using an after-tax cost of debt implies that a specific financing cost is being applied to the analysis.

Using an after-tax cost of debt introduces a bias against leasing by producing a lower NAL.

Using a weighted average cost of capital does not introduce a sequencing problem.

According to M&M using a WACC or after-tax cost of debt is irrelevant to the lease/debt decision.

Which of the following statements is not correct concerning the leasing puzzle?

Group of answer choices

The leasing puzzle involved trying to explain why firms lease cars but not motorcycles.

Goods are complements if the demand for one good increases the demand for another good.

Goods are substitutes if the demand for one good decreases the demand for another good.

The leasing puzzle found that firms that had a large use of debt also had a large use of leasing.

Dr. dlT found that it was the assets that determined the level of leverage and thus firms that had large amounts of debt could also handle a large level of leasing.