Which of the Following Statements Is NOT CORRECT

question 17

Multiple Choice

Which of the following statements is NOT CORRECT?

• A) accruals are "free" in the sense that no explicit interest is paid on these funds.
• B) a conservative approach to working capital management will result in most, if not all, permanent current operating assets being financed with long-term capital.
• C) the risk to a firm that borrows with short-term credit is usually greater than if it borrowed using long-term debt. this added risk stems from the greater variability of interest costs on short-term debt and possible difficulties with rolling over short-term debt.
• D) bank loans generally carry a higher interest rate than commercial paper.
• E) commercial paper can be issued by virtually any firm so long as it is willing to pay the going interest rate.

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Definitions:

Compounded Quarterly

Interest calculation method where the interest is added to the principal amount every three months, leading to interest on interest in subsequent periods.

Account Receivable

Money owed to a company by its customers for goods or services that have been delivered but not yet paid for.

Compounded Monthly

The calculation of interest where the interest earned over a month is added to the principal, and this process is repeated every month.

Compounded Monthly

The process of adding interest to the principal sum of a loan or deposit, or in other words, interest on interest, on a monthly basis.