Cash flows from operations may not be sufficient for a firm to keep up with growth-related financing needs, or the firm may not be able to always generate enough cash flow to maintain a surplus of cash. Firms prefer to borrow now to fulfill their capital requirements through means of short-term financing or long-term financing. Both methods have their advantages and disadvantages.

The following statement identifies a possible characteristic of short-term financing.

Consider this case:

Interest rates on short-term loans are more stable than long-term loans.

Identify whether the preceding statement is true or false.

A.) This statement is true.

B.) This statement is false.

Firms use a variety of short-term financing sources to support working capital. Use the descriptions in the following table to identify the short-term financing source.

Description	Short-Term Financing Source
A formal, committed line of credit extended by a bank or other lending institution.	A.) Revolving Credit Agreement B.) Commercial Paper C.) Secured Loan D.) Trade Credit E.) Accruals
Unsecured, short-term promissory notes issued by large firms in denominations of $100,000 or more. Short-Term Financing Source A.) Revolving Credit Agreement B.) Commercial Paper C.) Secured Loan D.) Trade Credit E.) Accruals