Which of the Following Statements About Various Short-Term Credit Alternatives

Multiple Choice

Which of the following statements about various short-term credit alternatives is correct?

A) The firm has complete control over the terms and the levels of the accruals it uses, which makes this type of credit an attractive source of additional funding.
B) Commercial paper is a type of secured promissory note issued by large, financially strong firms.
C) Banks generally charge a commitment fee on the used balances of credit lines to compensate for guaranteeing the availability of revolving credit.
D) The funds used by a firm to maintain a compensating balance with the bank cannot be used by the firm to pay its bills or to invest in capital budgeting projects.
E) The credit created when one firm buys goods or services on credit from another firm is known as accounts receivable.