Question

When Bank RI or any other bank assesses whether a business is creditworthy and capable of repaying a long- or short-term debt obligation, one of the first things they consider is the movement of money into and out of the firm, also known as

a.cash flow.

b.risk-return ratio.

c.sales revenue.

d.collateral.

Which of the following forms of debt financing is unlikely to be used by a firm the size of Moonworks?

a.Commercial paper

b.Promissory note

c.Loans secured by inventory

d.Trade credit

Answer 1

Answer:A. Commercial paper

Explanation:The form of debt financing is unlikely to be used by a firm the size of Moonworks is a commercial paper.

A commercial paper is issued by large corporation to secure funds inorder to meet a debt that has a short time duration such as payroll, and its backed only by the bank that issues it or the borrowing company promised payment on the face amount on the due date which must have been specified on the note.