________ Is a Form of Short-Term Financing

question 267

Multiple Choice

________ is a form of short-term financing. Businesses buy merchandise from their suppliers, but are not required to pay for their purchases until some future date.

• A) Secured credit
• B) Trade credit
• C) Revolving credit
• D) Factoring

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Definitions:

Net Present Value

A method used in capital budgeting to assess the profitability of an investment by calculating the difference between the present value of cash inflows and outflows.

Equivalent Annual Cost

A financial analysis tool used to compare the annual costs of alternatives with different lifespans to assess which is more cost-effective.

Internal Rate of Return

A financial metric used to estimate the profitability of potential investments, calculated as the rate of return that makes the net present value of all cash flows equal to zero.

Erosion

In finance, erosion refers to the gradual reduction of assets, earnings, or investment value over time.