Short-term Financing Quiz

What is the typical maturity period for short-term financing?

• Less than one year

• One to five years

• Five to ten years

• More than ten years

Which of the following is a source of spontaneous short-term financing?

• Bank loan

• Commercial paper

• Accounts payable

• Equity

Which policy uses long-term funds to finance both fixed and current assets?

• Aggressive policy

• Conservative policy

• Maturity matching policy

• Flexible policy

What does the credit term '2/10, net 30' mean?

• 2% discount if paid within 10 days, otherwise pay within 30 days

• 2% penalty if paid after 10 days

• Pay within 2 days to get 10% discount

• Pay 30% within 10 days

Which is an advantage of short-term financing?

• High interest cost

• Quick approval

• Stable repayment

• Lower risk

What is a drawback of short-term financing?

• Low flexibility

• Higher risk due to refinancing

• High flotation cost

• Complex loan contracts

Which approach matches the life of the asset with the life of the financing?

• Aggressive approach

• Maturity matching approach

• Conservative approach

• Spontaneous financing approach

What is the effective annual rate if a firm skips a 2/10, net 30 discount?

• 24.35%

• 18.00%

• 12.90%

• 36.73%

Which of the following is NOT a form of short-term financing?

• Trade credit

• Bank overdraft

• Common stock issuance

• Factoring

Commercial paper is typically issued by:

• Large and creditworthy companies

• Startups

• Small businesses

• Government agencies