Exam 16: Short-Term Business Financing

Maturity factoring is where the firm selling its accounts receivable is paid on the normal collection date or net due date of the account.

If net working capital is negative:

A firm's current assets.

Eriez Magnetics purchased goods with a purchase price of $10,000 and credit terms of 2/10 net 30. The firm paid for these goods on the 5th day after the date of sale. The firm must pay ________ for the goods.

Which of the following is a characteristic of commercial paper dealers?

With accounting factoring, the factor assumes all credit risk on accounts receivable.

Higher financing cost and lower risk of not being able to borrow when short-term funds are needed are characteristics of:

Which of the following is not true regarding factoring accounts receivable?

A revolving credit agreement is a:

For bank loans, the effective interest rate is generally

In general, most businesses should take advantage of a cash discount of 2/10 net 30 because the cost of not doing so is more expensive than the cost of borrowing.

An organization that engages in accounts-receivable financing by purchasing the accounts outright is referred to as a:

A factor engages in accounts receivable financing for business by taking accounts receivable as collateral for making short-term loans.

Which of the following is not a characteristic of a commercial finance company?

Working capital includes a firm's marketable securities, accounts receivable, inventories, and mortgage debt.

If a company can stretch its accounts payable without damaging its credit rating, it is effectively ___________ the cost of foregoing the cash discount.

A firm selling its receivables is paid on the normal collection date, or net due date, of the account.

An organization without a bank charter that advances funds to businesses is called a (n):

The approximate effective cost (EC) of financing the discount price of trade credit under terms 2/10, net/30 using a 360 day year is:

Ningbo Steel was extended credit terms of 3/15 net 30. If the firm were able to stretch its accounts payable to 50 days without damaging its credit rating, the cost of giving up the cash discount would only be