What can commercial paper be used to finance?

What can commercial paper be used to finance?

• A. Long-term debt obligations
• B. Short-term operating expenses
• C. Real estate investments
• D. Corporate acquisitions

Answer: (B)

Commercial paper is a short-term debt instrument issued by corporations to meet immediate financial needs. Typically, it is used to finance short-term operating expenses, such as inventory purchases, payroll, and other liabilities that are due in the near term, usually within 270 days. This financial instrument provides quick access to capital without the need for lengthy paperwork associated with traditional loans or other forms of credit. It is not designed for long-term obligations, such as long-term debt or investments like real estate or corporate acquisitions, which generally require more extensive financing. Therefore, using commercial paper for short-term operating expenses aligns perfectly with its primary purpose and characteristics as a financial tool for businesses.

Commercial paper is a short-term debt instrument issued by corporations to meet immediate financial needs. Typically, it is used to finance short-term operating expenses, such as inventory purchases, payroll, and other liabilities that are due in the near term, usually within 270 days.

This financial instrument provides quick access to capital without the need for lengthy paperwork associated with traditional loans or other forms of credit. It is not designed for long-term obligations, such as long-term debt or investments like real estate or corporate acquisitions, which generally require more extensive financing. Therefore, using commercial paper for short-term operating expenses aligns perfectly with its primary purpose and characteristics as a financial tool for businesses.