Which of the Following Statements Is Correct

question 32

Multiple Choice

Which of the following statements is correct?

• A) If a firm begins buying on terms of 2/20,net 60,after having bought on terms of 2/10,net 30,this will,other things held constant,probably lengthen its cash conversion cycle.
• B) If a firm begins buying on terms of 2/20,net 60,after having bought on terms of 2/10,net 30,this will,other things held constant,increase the cost of nonfree (costly)trade credit.
• C) Because the loan is paid off faster,the effective interest rate is lower if a firm borrows $100,000 on the basis of a 10% "add-on interest rate" loan paid off in 12 equal monthly installments than if the firm borrows the $100,000 on a loan which calls for a nominal 10% rate and for all interest and principal to be paid (repaid)at the end of one year.
• D) "Commercial paper" is the name given to a type of short-term loan typically used by firms that are too small and financially weak to obtain credit from banks and other normal sources of credit.
• E) Statements a,b,c,and d are all false.

---

Definitions:

Employment-At-Will Doctrine

A legal principle stating that either the employer or the employee can terminate employment at any time without any prior notice, for any reason except an illegal one.

Public Policy

encompasses principles and standards regarded by the government as being in the public's best interests, influencing and guiding regulatory measures and laws.

Contract Theory

An academic field that explores how contractual agreements are formed, enforced, and interpreted, including the motivations and consequences of parties involved.

Employee Monitoring

involves the use of various methods by employers to oversee and track the performance, activities, and location of employees, often to enhance productivity and safeguard company assets.