What is the primary function of commercial paper?

The primary function of commercial paper is to finance short-term operating expenses and working capital needs. This type of unsecured, short-term debt instrument is issued primarily by corporations to obtain funds for a time frame typically ranging from a few days to up to 270 days. The proceeds from the issuance of commercial paper are usually utilized for immediate cash flow needs, such as paying for inventory, payroll, and other operating expenses that require quick access to capital without the complexities associated with bank loans or long-term financing.

In contrast, financing long-term investments generally involves other instruments like bonds or mortgages that have longer maturities and provide access to larger amounts of capital over extended time frames. Readily marketable securities refer to financial instruments that can be quickly and easily sold in the market, which is a characteristic not typically associated with commercial paper. Lastly, while some corporate financing strategies may yield tax advantages, commercial paper itself does not inherently provide tax benefits in the way that some other instruments might. Thus, option C accurately reflects the fundamental role that commercial paper plays in corporate finance.