Definition of Commercial Paper



Commercial papers are short-term debt instruments like bonds. The real difference is that the commercial papers are used for the support of paying short-term liabilities. The date of maturity for most of the commercial papers is shorter than one year and mostly it is in days because it is used to pay short-term commitments like payment for inventories to creditors or working capital needs.

 


Commercial papers are normally issued at discount to the face value like in the case of a zero-coupon bond that is issued at discount and redeemed at the par value. The prevailing interest rates in the market are used as a discount factor.


View More Corporate Finance Definitions