By Offering Credit to Customers, the Firm May

question 125

Multiple Choice

By offering credit to customers, the firm may

• A) decrease its investment in accounts payable.
• B) decrease the cost of goods purchased.
• C) increase the price of the good to cover its costs.
• D) decrease its investment in accounts receivable.

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Definitions:

Fannie Mae

A government-sponsored enterprise established to expand the flow of mortgage money by creating a secondary market for mortgage loans.

Money Market Instrument

Short-term financial instruments that are highly liquid and considered safe, such as treasury bills and certificates of deposit.

Preferred Stock

A class of ownership in a corporation with a fixed dividend, senior to common stock but junior to bonds in claim on assets and earnings.

Commercial Paper

Short-term unsecured promissory notes issued by companies to finance their short-term liabilities.