A Firm Should Choose to Borrow Using Accounts Payable Only

question 93

True/False

A firm should choose to borrow using accounts payable only if trade credit is the cheapest source of funding.

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Definitions:

Compounded Monthly

A method of calculating interest in which the interest earned each month is added to the principal, and future interest is calculated on the new total.

Interest Rate

The percentage at which interest is paid by a borrower for the use of money, or the rate earned on an investment.

Annual Benefits

Benefits or returns that are received on a yearly basis from investments, insurance policies, or employee benefit programs.

Compounded Monthly

Refers to the process of applying interest to an initial amount and any accumulated interest on a monthly basis.