Commercial paper is a form of financing that consists of short-term, unsecured promissory notes issued by firms with a high credit standing. Generally, only large companies with a solid history of financial soundness are able to issue commercial paper. This discussion focuses on the most recent uses of commercial paper.
Read the section “The Ebb and Flow of Commercial Paper” from your textbook (p. 654). Respond to the following:
• What factors contribute to an expansion of the commercial paper market?
• What factors cause a contraction in the commercial paper market?
• How do companies use commercial paper to raise short-term funds?
• Who can issue commercial paper? Who buys commercial paper?