The credit that is created when a supplier sells goods and services on an account with extended payment terms is called . Garcia Assemblers Corporation is a manufacturing company. Garcia’s financial managers use many sources of financing for the company’s annual borrowings, which exceed $100 million. Garcia’s credit rating is excellent. At the moment, the managers are looking to fund a $5 million payroll by issuing a note with a 30-day maturity. What type of financing is this? Trade credit Accrual Commercial paper Bank loans

1. The credit that is created when a supplier sells goods and services on an account with extended payment terms is called Trade credit.  

2. The type of financing practiced by Garcia Assemblers Corporation is called Commercial paper.

Explanation:

Trade credit is the type of credit wherein a supplier sells goods and services with extended payment term. There is no immediate exchange of money.

Commercial paper is a short-term debt instrument mostly used by large corporations to finance payrolls and other short-term liabilities. It is unsecured as it is mostly issued without collateral. This method of financing is used by firms with good debt ratings. The denominations of the commercial paper is also usually high. Garcia Assemblers Corporation fit the description of a firm with high debt ratings using commercial paper to finance a high payroll.

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