Question

Many companies secure financing from various sources with various payback periods. Not all funding sources are the same, and in fact, some can come with a pretty high cost to the firm. These costs could include high interest rates, long payback periods, and increased ownership in the firm which could result in lost control.

Analyze the funding options listed, and determine if the option is usually a short-term or long-term strategy.

a. Line of credit
b. Commercial paper
c. Trade credit
d. Bank load of 10 months
e. Bond
f. Stock
g. Bank load of 20 months

Answer 1

Answer and Explanation:

The classification of the funds as a short term or long term strategy as follows;

a. Line of credit = short term financing

b. Commercial paper = short term financing

c. Trade credit = short term financing

d. Bank load of 10 months = short term financing

e. Bond = long term financing

f. Stock = long term financing

g. Bank load of 20 months = long term financing

In this way, the classifications of the funds has to be done