Quiz Management of Current Liabilities (FM)

Commercial paper is an example of spontaneous financing because it is generated from day to day operations.

• True
• False

Under the hedging principles, cash needed to repay a loan will be generated by the sale of excess inventory.

• True
• False

A revolving credit agreement is a legally binding agreement between a borrower and the lender

• True
• False

Issuers of commercial paper usually maintain line of credit with banks to banks to back up their short term financing needs.

• True
• False

Equipment is frequently used as collateral for short term loans

• True
• False

The continual practice of stretching trade credit is potentially a very useful source of short term credit for a firm

• True
• False

Notes payable is a spontaneous source of financing

• True
• False

Commercial paper is a short term, unsecured, promissory notes

• True
• False

Short term credit can be divided into secured and secured loans

• True
• False

Trade credit is the largest source of short term credit for most companies

• True
• False