Commercial paper is best described as:
Correct answer: B. Unsecured short-term debt issued by creditworthy companies
- A. Long-term secured debt issued by governments
- B. Unsecured short-term debt issued by creditworthy companies
- C. Preference shares issued to existing shareholders
- D. A bank deposit held for a fixed period
Explanation
Commercial paper consists of unsecured short-term promissory notes issued mainly by financially strong companies. It is used to meet short-term financing needs rather than to raise permanent capital.
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Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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