Commercial banks are a major source of term loans

Business Dec 25, 2020

Commercial banks are a major source of term loans. These loans are best used for:

A) financing the expansion of the business.

B) financing the establishment of overseas operations.

C) financing current assets like inventory and accounts receivable.

D) financing the payment of dividends.

Expert Solution

The answer would be A.

The expansion of a business could be funded by medium-term and long-term loans. A firm would take a long-term loan since the expansion will consume a significant time. In addition, a long-term loan would have a stable financing costs.

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