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 […]
QUESTION For which type of loan does a bank extend credit that is to be used for a specific purpose? A) line of credit B) revolving credit agreement C) transaction loan D) secured loan E) unsecured loan ANSWER Answer: C Explanation: C) A transaction loan is credit by a bank for a specific purpose, […]
QUESTION What is the trade-off borrowers are willing to make when banks assume their higher risk loans? A) shorter term of the loan B) longer term of the loan C) paying a higher interest rate D) paying a lower interest rate E) forfeiting all collateral ANSWER Answer: C Explanation: C) When a bank is […]
QUESTION What are borrowers required to sign when accepting a long-term loan? A) term-loan agreement B) loan-collateral agreement C) commercial paper D) long-term line of credit E) term of trade ANSWER Answer: A Explanation: A) Long-term loans require that borrowers sign a term-loan agreement, a promissory note indicating specific installments, such as monthly or […]
