Question

Who issues commercial paper and for what purpose?

Answer 1

Solution :

Commercial paper is a money market instrument issued in the form of a participatory note and it has nature of short-term debt instrument. It is generally issued by large corporations and it has no collateral attached to it. It is issued with a discount to the face value and maturity generally remains from few days to 1 years.

Purpose of the commercial paper

• It can be used for the financing of accounts receivable,
• Purchasing or maintaining inventories
• To fulfill the obligation of meeting short-term liabilities