Compared with bill financing, commercial paper financing offers a large creditworthy company lower costs owing to no contingent liability when sold on.

Here's why:

1. Commercial paper is a form of short-term unsecured debt that is issued by corporations to raise funds. It is typically issued at a discount and redeemed at face value, which allows the issuing corporation to raise funds at a lower cost.

2. Unlike bill financing, commercial paper does not involve any contingent liability when sold on. This means that the issuing corporation is not liable for any additional costs or obligations if the commercial paper is sold to another party.

3. In contrast, bill financing involves a contingent liability because the borrower is required to repay the loan if the bill is not paid by the due date. This can result in higher costs for the borrower, especially if the bill is sold on to another party.

4. Furthermore, commercial paper does not require the issuing corporation to pay any bank fees, which can further reduce the cost of financing.

5. Finally, commercial paper does not require any collateral, which can also reduce the cost of financing for the issuing corporation.

Therefore, for a large creditworthy company, commercial paper financing can offer lower costs compared to bill financing.

Question

Compared with bill financing, commercial paper financing offers a large creditworthy company lower costs owing to no contingent liability when sold on.

Here's why:

1. Commercial paper is a form of short-term unsecured debt that is issued by corporations to raise funds. It is typically issued at a discount and redeemed at face value, which allows the issuing corporation to raise funds at a lower cost.

2. Unlike bill financing, commercial paper does not involve any contingent liability when sold on. This means that the issuing corporation is not liable for any additional costs or obligations if the commercial paper is sold to another party.

3. In contrast, bill financing involves a contingent liability because the borrower is required to repay the loan if the bill is not paid by the due date. This can result in higher costs for the borrower, especially if the bill is sold on to another party.

4. Furthermore, commercial paper does not require the issuing corporation to pay any bank fees, which can further reduce the cost of financing.

5. Finally, commercial paper does not require any collateral, which can also reduce the cost of financing for the issuing corporation.

Therefore, for a large creditworthy company, commercial paper financing can offer lower costs compared to bill financing.

Knowee AI · Accepted Answer

Compared with bill financing, commercial paper financing offers a large creditworthy company lower costs owing to no contingent liability when sold on.

Here's why:

1. Commercial paper is a form of short-term unsecured debt that is issued by corporations to raise funds. It is typically issued at a discount and redeemed at face value, which allows the issuing corporation to raise funds at a lower cost.

2. Unlike bill financing, commercial paper does not involve any contingent liability when sold on. This means that the issuing corporation is not liable for any additional costs or obligations if the commercial paper is sold to another party.

3. In contrast, bill financing involves a contingent liability because the borrower is required to repay the loan if the bill is not paid by the due date. This can result in higher costs for the borrower, especially if the bill is sold on to another party.

4. Furthermore, commercial paper does not require the issuing corporation to pay any bank fees, which can further reduce the cost of financing.

5. Finally, commercial paper does not require any collateral, which can also reduce the cost of financing for the issuing corporation.

Therefore, for a large creditworthy company, commercial paper financing can offer lower costs compared to bill financing.

Question

Solution

Similar Questions

Upgrade your grade with Knowee