Short Term Financing Paper 1

1

Which one of the following is a spontaneous source of financing?






2

Which one of the following provides a spontaneous source of financing for a firm?






3

Which one of the following statements about trade credit is correct? Trade credit is






4

Which one of the following financial instruments generally provides the largest source of short-term credit for small firms?






5

Richardson Supply has a $100 invoice with payment terms of 2/10, net 60. Richardson can either take the discount or place the funds in a money market account paying 6% interest. Using a 360-day year, Richardson’s cost of not taking the cash discount is






6

Which one of the following statements concerning cash discounts is correct?






7

When a company offers credit terms of 3/10, net 30, the annual interest cost based on a 360-day year is






8

Maple Motors buys axles in order to produce automobiles. Maple carries an average credit balance of $25,000,000 with its axle supplier. The axle supplier provides credit terms of 1/10 net 25. The nominal annual cost of Maple not taking the trade discount is closest to which one of the following? Assume a 360-day year.






9

Garo Company, a retail store, is considering forgoing sales discounts to delay using its cash. Supplier credit terms are 2/10, net 30. Assuming a 360-day year, what is the annual cost of credit if the cash discount is not taken and Garo pays net 30?






10

When a company offers credit terms of 2/10, net 30, the annual interest cost, based on a 360-day year, is






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