alleryStart learning →What are the three important forms of long-term debt?
ATrade credit, commercial paper and factoring
BTerm loans, bonds and mortgage loans taken
CCommon stock, preferred stock and warrants
DLines of credit, overdrafts and revolving credit
Answer & Solution
Correct answer: B. Term loans, bonds and mortgage loans taken
1. Long-term debt is used to finance long-term capital expenditures, with initial maturities typically between 5 and 20 years.
2. The three important forms are term loans, bonds and mortgage loans.
3. Trade credit, commercial paper and factoring are all short-term arrangements.
4. Common and preferred stock are equity rather than debt, so they carry no obligation to repay principal.
_Source: OpenStax Introduction to Business (CC BY 4.0), Ch 16 "Understanding Financial Management and Securities Markets", section 16.4 Raising Long-Term Financing_
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