11. Which of the fol ich of the following statements is true of the different ty

Question

11. Which of the fol ich of the following statements is true of the different types of short-term creditsz e tact tha explicit interest cost is paid on accruals and that the firm can exercise onsid erable control over their level makes accruals an attractive source of additional ercial paper is a type of secured promissory note issued by large, financially generally charge a commitment fee on the used balances of credit lines to funding. b. Comm strong firms. Banks c. ving credit. y a firm to maintain a compensating balance with the bank cannot be used by the firm to pay its bills or to invest and can earn no interest. e. The credit created when one firm buys on credit from another firm is known as accounts receivable 12. Accruals are considered: a. adjustable rate debt since a varying rate of interest is paid on them. b. expensive debt since high rates of interest are paid on them. c. cheap debt since low rates of interest are paid on them. d. free debt since no interest is paid on them. e. fixed-rate debt since a constant rate of interest is paid on them

Explanation / Answer

Ans11. The following statements are true:

(d) The funds used by a firm to maintain a compensating balance with the bank cannot be used by the firm to pay its bills or to invest and can earn no interest.

Ans12. Accruals are considered

(d) free debt since no interest is paid on them

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