Unformatted text preview: Commercial paper is an alternative to short - term bank borrowing for a corporation because it gives
They another way of borrowing or acquiring funds needed in the immediate future .
Able to issue commercial paper , the rate is often below the rate that banks require . More details are*
Given below .
Commercial paper is a short - term unsecured promissory note that is issued in the open market and
That the obligation of the issuing corporation . The primary purpose of commercial paper
Was to provide short - term funds for seasonal and working capital needs .
Now use commercial paper for other purposes such as bridge financing . For example , suppose that
a corporation needs long-term funds to build a plant or acquire equipment . Rather than raising*
Long-term Funds Immediately , The Corporation May Elect To Postpone The Offering Until More*
Favorable capital Market conditions Prevail . The Funds raised by issuing Commercial paper are*
Used until longer - term securities are sold ....
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- Spring '19
- Finance, Promissory note, term bank borrowing