Multiple Choice
Which type of accounting provides managers with information and incentives to perform well within an organization?
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1. Introduction to Accounting
Types of Accounting
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Which of the following is NOT a characteristic of commercial paper?
A
It is used to finance short-term liabilities.
B
It typically has a short maturity period.
C
It is generally issued by government agencies.
D
It is usually unsecured.
Verified step by step guidance1
Understand the concept of commercial paper: Commercial paper is a short-term, unsecured promissory note issued by corporations to finance their short-term liabilities, such as accounts payable or inventory purchases.
Review the characteristics of commercial paper: It is typically unsecured, meaning it is not backed by collateral. It also has a short maturity period, usually ranging from a few days to 270 days.
Analyze the options provided: The first three options describe characteristics of commercial paper, such as financing short-term liabilities, having a short maturity period, and being unsecured.
Identify the incorrect statement: Commercial paper is not issued by government agencies. Instead, it is issued by corporations with high credit ratings to meet their short-term funding needs.
Conclude that the correct answer is the statement that does not align with the characteristics of commercial paper, which is 'It is generally issued by government agencies.'
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