alleryStart learning →What are the three main types of unsecured short-term loans?
ATrade credit, bank loans and commercial paper
BTerm loans, bonds and mortgage loans available
CFactoring, leasing and pledged inventory loans
DCommon stock, preferred stock and retained profit
Answer & Solution
Correct answer: A. Trade credit, bank loans and commercial paper
1. Unsecured short-term loans come in three main types: trade credit, bank loans and commercial paper.
2. Trade credit arises when a seller lets a buyer pay later, and the buyer books it as an account payable.
3. Unsecured bank loans include lines of credit and revolving credit agreements.
4. Term loans, bonds and mortgage loans are forms of long-term debt, so they belong to a different section of the balance sheet.
_Source: OpenStax Introduction to Business (CC BY 4.0), Ch 16 "Understanding Financial Management and Securities Markets", section 16.3 Obtaining Short-Term Financing_
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