Question

Short-term loans which are backed by the taxing power of the governmental unit and used to meet working capital requirements are called:______.A) Inter-fund loans. B) Appropriation loan. C) Other financing sources. D) Tax anticipation notes.

Answer 1

Answer:

D) Tax anticipation notes.

Explanation:

Short-term loans that are backed by the taxing power of the governmental unit and used to meet working capital requirements are called Tax anticipation notes. Tax anticipation notes are short-term notes or short-term loans, issued at a discount by the states or municipalities to finance current operations before tax revenues are received with a maturity period usually less than a year or a stated future date. Tax anticipation notes are used by municipalities to bridge funding gaps like to meet the working capital requirements.