The following questions are true or false 1. Since commercial bank loans are cheaper than trade...

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Finance

The following questions are true or false
1. Since commercial bank loans are cheaper than trade credit,few firms use trade credit.
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2. The smaller the trade discount, the more expensive is thetrade credit.
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3. A change in the trade discount from 2% to 3% encourages theuse of trade credit.
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4. Trade credit is primarily used by retailers to financeinventory.
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5. If goods cost $1,000 and the terms of credit are 2/15, n45,the firm does not have to pay until the 45^th day.
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6. One reason why firms use trade credit is that it is aspontaneous source of finance.
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7. When a commercial bank grants a loan, it may decrease thecost of the loan by requiring an origination fee.
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8. Commercial paper is usually secured by inventory.
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9. Only firms with good credit ratings are able to sellcommercial paper.
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10. If a firm has an excellent credit rating, it may usecommercial paper as a source of long-term finance.

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Answer 1 False Explanation Although commercial bank loans are cheaper than trade credit most firms use trade credit Answer 2 False Explanation Cost of trade credit Discount 1 Discount 365 Payment DateDiscount Period As such higher the trade discount the See Answer

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