Final answer:
A short-term note payable from a purchase is commonly created to address an inventory shortage. In financial markets, an increase in loans is influenced by a rise in demand or a rise in supply. A weak economy is less likely to lead to capital deepening unlike a boost from international trade.
Step-by-step explanation:
In the context of business accounting, when faced with the specific situation of needing to address an inventory shortage, a company may opt to create a short-term note payable due to a purchase. This is a form of financing where the company borrows funds typically to purchase additional inventory or supplies. Other options such as excess cash reserves, equipment depreciation, and increased shareholder dividends are not directly associated with creating a note payable from a purchase.
As per the details provided, both a rise in demand and a rise in supply in the financial market can lead to an increase in the quantity of loans made and received. These changes can influence the availability and cost of credit, potentially making it more attractive for businesses and individuals to take out loans.
Regarding the question on capital deepening, it would generally not be associated with a weak economy where businesses are reluctant to invest in long-term physical capital. However, a rise in international trade could potentially contribute to capital deepening because businesses might invest more in physical capital to increase productive capacity and compete in international markets. Lastly, when deciding between raising funds through borrowing or issuing stock, a small business owner might consider factors such as control over the company, cost of capital, and the impact on the company's financial stability.