Financial Managers Should Always Use the Free Component of the Trade

question 100

Multiple Choice

Financial managers should always use the free component of the trade credit, but they should use the costly component only after analyzing this source of financing to make sure

• A)that it is greater than the cost of funds for the firm.
• B)that it has a maturity less than the average collection period.
• C)that it is less than the cost of funds for the firm.
• D)that the default risk inherent in accepting this trade credit is low.
• E)that firms offering the trade credit does not issue commercial paper.

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