QUESTION What is the technique called that uses borrowed funds to increase a firm’s rate of return? A) private placement B) cost of capital C) financial leverage D) revolving credit agreement E) trade credit ANSWER Answer: C Explanation: C) Financial leverage is the technique of using borrowed funds to increase a firm’s rate of […]
QUESTION What is the length of time called for which the supplier (seller) extends credit? A) promissory term B) terms of trade C) trade period D) commercial period E) net period ANSWER Answer: E Explanation: E) The length of time for which the supplier (seller) extends credit is known as the net period.
QUESTION What is a company with lots of debt called? A) indentured B) unsecured C) heavily leveraged D) collateraled E) bankrupt ANSWER Answer: C Explanation: C) A company with lots of debt is called heavily leveraged.
QUESTION Which of the following is considered a source of long-term financing? A) trade credit B) factoring C) commercial paper D) credit cards E) equity financing ANSWER Answer: E Explanation: E) Sources of short-term financing are trade credit, short-term loans, factoring, and commercial paper. Sources of long-term financing are long-term loans, debt financing, and […]
QUESTION The Purple Vase Flower Store bought some shipping materials, received a bill from the supplier, and then paid the bill within 90 days. Which type of financing has Purple Vase utilized? A) long-term financing B) debt financing C) equity financing D) trade credit E) commercial paper ANSWER Answer: D Explanation: D) An important […]
QUESTION What is the best definition of an interest rate? A) the conditions a seller gives a buyer when offering a short-term loan B) the amount of time for which the supplier extends credit C) the value of the personal property the borrower is willing to forfeit if the loan goes unpaid D) the price […]
QUESTION Which of the following probably would NOT be used as collateral against a secured loan? A) a car B) jewelry C) a piece of land D) cash E) a home ANSWER Answer: D Explanation: D) Personal property is usually used as collateral against a secured loan. This might be in the form of […]
QUESTION As a borrower, Iris pledges one of her assets, a vacation property, that she realizes she’ll have to forfeit if the loan is not repaid. What type of loan is this? A) a secured loan B) an unsecured loan C) a loan with no collateral D) a trade credit E) a transaction loan […]
QUESTION To buy a small business, Chelsea signs a written contract that states that she agrees to pay the seller $50,000 within three years. What is she offering? A) a promissory note B) collateral C) terms of trade D) debt financing E) commercial paper ANSWER Answer: A Explanation: A) Trade credit can take different […]
QUESTION Which of the following is TRUE of commercial paper? A) They are secured. B) They are not promissory notes. C) They are long-term notes. D) They are $100,000 or greater. E) They are issued mainly by smaller institutions. ANSWER Answer: D Explanation: D) Substitutes for bank loans, commercial paper consists of unsecured, short-term […]
