Which One of the Following Statements Correctly Describes a Credit

question 273

Multiple Choice

Which one of the following statements correctly describes a credit instrument?

• A) All credit sales of a commercial nature are accompanied by a promissory note.
• B) A time draft requires payment at the time the goods are delivered.
• C) A commercial draft is signed once the goods are received in good shape by the buyer.
• D) A banker's acceptance is a sight draft for which payment has been guaranteed in the future by a bank.
• E) Under a conditional sales contract, the seller retains legal possession of the good sold until the sales invoice has been paid in full.

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Definitions:

Cost of Equity

Cost of equity is the return a company requires to decide if an investment meets capital return requirements and can be seen as the return on equity that shareholders expect for their investment risk.

Flotation Cost

The total costs incurred by a company in issuing new securities, including underwriting, legal, registration, and other expenses.

Cost of Capital

The rate of return a company must pay to its shareholders and debt holders, representing the cost of obtaining funds to finance its operations.

Long-Term Funds

Investments or sources of financing that are provided or required for a duration exceeding one year.