The Cost of Trade Credit Varies with the [Blank]

question 70

Multiple Choice

The cost of trade credit varies with the [blank].

• A)size of the cash discount
• B)length of time between the end of the discount period and the final due date
• C)length of time between the end of the discount period and when the firm purchased from the supplier
• D)both A and C

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Definitions:

Component Cost

The expense associated with acquiring or manufacturing each individual part of a product or service.

Flotation Cost

The total costs associated with issuing new securities, including underwriting fees and other expenses.

Preferred Stock

A class of ownership in a corporation that has a higher claim on assets and earnings than common stock, typically with dividends that are paid out before those of common stocks.

CAPM

The Capital Asset Pricing Model, a theory that describes the relationship between systematic risk and expected return for assets, particularly stocks.