Question 1

Which of the following is not an important source of short-term funds to small businesses?

Accepted Answer

A)  commercial banks 
B)  commercial paper 
C)  accounts receivable secured loans and/or use of factors 
D)  the Small Business Administration 
A)  commercial banks 
B)  commercial paper 
C)  accounts receivable secured loans and/or use of factors 
D)  the Small Business Administration

Question 2

When accounts receivable are factored: the borrower sells the receivable; accounts receivable balances are removed from the balance sheet; the customer payment is made to the factor; and interest is charged on the funds advanced.

Accepted Answer

A) True 
 B)False

Question 3

New cars would be a type of inventory for which a blanket inventory lien would be used.

Accepted Answer

A) True 
 B)False

Question 4

Firms who wish to obtain short-term secured loans generally have two major current assets available as collateral in the form of:

Accepted Answer

A)  cash and marketable securities 
B)  receivables and inventory 
C)  receivables and factoring 
D)  inventory and floor planning 
A)  cash and marketable securities 
B)  receivables and inventory 
C)  receivables and factoring 
D)  inventory and floor planning

Question 5

Tea leaves would be a type of inventory for which a blanket inventory lien would be used.

Accepted Answer

A) True 
 B)False

Question 6

The bank line of credit is:

Accepted Answer

A)  the type of business activity on which a particular bank concentrates its lending 
B)  the maximum amount of credit extended to a business customer during a period of one year 
C)  the average of loans made to a business customer during a year 
D)  the loan limit that a bank has established for a business customer 
A)  the type of business activity on which a particular bank concentrates its lending 
B)  the maximum amount of credit extended to a business customer during a period of one year 
C)  the average of loans made to a business customer during a year 
D)  the loan limit that a bank has established for a business customer

Question 7

Tea leaves would be a type of inventory for which a trust receipt would be used.

Accepted Answer

A) True 
 B)False

Question 8

The ________ is the lowest rate of interest charged on business loans to the best business borrowers by the nation's leading banks.

Accepted Answer

A)  prime rate 
B)  commercial paper rate 
C)  federal funds rate 
D)  treasury bill rate 
A)  prime rate 
B)  commercial paper rate 
C)  federal funds rate 
D)  treasury bill rate

Question 9

Compensating balances at a commercial bank are:

Accepted Answer

A)  net differentials of balances with correspondent banks 
B)  maintained by Federal Reserve for services rendered 
C)  account balances required in connection with unsecured business loans under bank lines of credit 
D)  required vault-held reserves as an alternative to reserves held by Federal Reserve Banks 
A)  net differentials of balances with correspondent banks 
B)  maintained by Federal Reserve for services rendered 
C)  account balances required in connection with unsecured business loans under bank lines of credit 
D)  required vault-held reserves as an alternative to reserves held by Federal Reserve Banks

Question 10

A trust receipt is a lien against everything in inventory.

Accepted Answer

A) True 
 B)False

Question 11

A compensating balance on a bank loan effectively ____________ the cost of the loan.

Accepted Answer

A)  raises 
B)  lowers 
C)  has no effect on 
D)  has an indeterminate effect on 
A)  raises 
B)  lowers 
C)  has no effect on 
D)  has an indeterminate effect on

Question 12

The U.S. Small Business Administration (SBA) was established by the federal government to provide financial assistance to small firms unable to obtain loans through direct government loans.

Accepted Answer

A) True 
 B)False

Question 13

Spontaneous financing refers to:

Accepted Answer

A)  financing provided by accounts payable and accrued liabilities 
B)  line of credit agreements 
C)  revolving credit agreements 
D)  financing done without collateral 
A)  financing provided by accounts payable and accrued liabilities 
B)  line of credit agreements 
C)  revolving credit agreements 
D)  financing done without collateral

Question 14

A discounted loan is one in which the borrower receives a discount on the interest rate.

Accepted Answer

A) True 
 B)False

Question 15

The aggressive financing approach is a strategy that attempts to match the maturities of assets with the maturities of the liabilities with which they are financed.

Accepted Answer

A) True 
 B)False

Question 16

If a firm chooses to take a cash discount when offered terms of 1/15 net 35, it should

Accepted Answer

A)  pay on the first day of the discount period. 
B)  pay on day 15. 
C)  pay on day 35. 
D)  pay somewhere in the middle of the discount price. 
A)  pay on the first day of the discount period. 
B)  pay on day 15. 
C)  pay on day 35. 
D)  pay somewhere in the middle of the discount price.

Question 17

New cars would be a type of inventory for which a trust receipt would be used.

Accepted Answer

A) True 
 B)False

Question 18

A line of credit costs the firm only the normal interest for the period during which money is actually borrowed.

Accepted Answer

A) True 
 B)False

Question 19

In general, a firm that secures a bank line of credit pays interest on:

Accepted Answer

A)  the full line of credit. 
B)  only the amount actually borrowed. 
C)  on the unused portion of the line of credit. 
D)  on the amount borrowed as well as on the unused portion of the line of credit. 
A)  the full line of credit. 
B)  only the amount actually borrowed. 
C)  on the unused portion of the line of credit. 
D)  on the amount borrowed as well as on the unused portion of the line of credit.

Question 20

In order to borrow $100,000 for a 5% loan on a discount loan basis with a 5% compensating balance; the firm will actually have to borrow:

Accepted Answer

A)  $105,263 
B)  $111,111 
C)  $100,000 
D)  $90,000 
A)  $105,263 
B)  $111,111 
C)  $100,000 
D)  $90,000

Which of the following is not an important source of short-term funds to small businesses?

When accounts receivable are factored: the borrower sells the receivable; accounts receivable balances are removed from the balance sheet; the customer payment is made to the factor; and interest is charged on the funds advanced.

New cars would be a type of inventory for which a blanket inventory lien would be used.

Firms who wish to obtain short-term secured loans generally have two major current assets available as collateral in the form of:

Tea leaves would be a type of inventory for which a blanket inventory lien would be used.

The bank line of credit is:

Tea leaves would be a type of inventory for which a trust receipt would be used.

The ________ is the lowest rate of interest charged on business loans to the best business borrowers by the nation's leading banks.

Compensating balances at a commercial bank are:

A trust receipt is a lien against everything in inventory.

A compensating balance on a bank loan effectively ____________ the cost of the loan.

The U.S. Small Business Administration (SBA) was established by the federal government to provide financial assistance to small firms unable to obtain loans through direct government loans.

Spontaneous financing refers to:

A discounted loan is one in which the borrower receives a discount on the interest rate.

The aggressive financing approach is a strategy that attempts to match the maturities of assets with the maturities of the liabilities with which they are financed.

If a firm chooses to take a cash discount when offered terms of 1/15 net 35, it should

New cars would be a type of inventory for which a trust receipt would be used.

A line of credit costs the firm only the normal interest for the period during which money is actually borrowed.

In general, a firm that secures a bank line of credit pays interest on:

In order to borrow $100,000 for a 5% loan on a discount loan basis with a 5% compensating balance; the firm will actually have to borrow:

The Financial Environment

Money and the Monetary System

Banks and Other Financial Institutions

Federal Reserve System

Policy Makers and the Money Supply

International Finance and Trade

Savings and Investment Process

Interest Rates

Time Value of Money

Bonds and Stocks: Characteristics and Valuations

Securities and Markets

Financial Return and Risk Concepts

Business Organization and Financial Data

Financial Analysis and Long-Term Financial Planning

Managing Working Capital

Capital Budgeting Analysis

Capital Structure and the Cost of Capital

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Exam 16: Short-Term Business Financing

Which of the following is not an important source of short-term funds to small businesses?

When accounts receivable are factored: the borrower sells the receivable; accounts receivable balances are removed from the balance sheet; the customer payment is made to the factor; and interest is charged on the funds advanced.

New cars would be a type of inventory for which a blanket inventory lien would be used.

Firms who wish to obtain short-term secured loans generally have two major current assets available as collateral in the form of:

Tea leaves would be a type of inventory for which a blanket inventory lien would be used.

The bank line of credit is:

Tea leaves would be a type of inventory for which a trust receipt would be used.

The ________ is the lowest rate of interest charged on business loans to the best business borrowers by the nation's leading banks.

Compensating balances at a commercial bank are:

A trust receipt is a lien against everything in inventory.

A compensating balance on a bank loan effectively ____________ the cost of the loan.

The U.S. Small Business Administration (SBA) was established by the federal government to provide financial assistance to small firms unable to obtain loans through direct government loans.

Spontaneous financing refers to:

A discounted loan is one in which the borrower receives a discount on the interest rate.

The aggressive financing approach is a strategy that attempts to match the maturities of assets with the maturities of the liabilities with which they are financed.

If a firm chooses to take a cash discount when offered terms of 1/15 net 35, it should

New cars would be a type of inventory for which a trust receipt would be used.

A line of credit costs the firm only the normal interest for the period during which money is actually borrowed.

In general, a firm that secures a bank line of credit pays interest on:

In order to borrow $100,000 for a 5% loan on a discount loan basis with a 5% compensating balance; the firm will actually have to borrow:

The Financial Environment

Money and the Monetary System

Banks and Other Financial Institutions

Federal Reserve System

Policy Makers and the Money Supply

International Finance and Trade

Savings and Investment Process

Interest Rates

Time Value of Money

Bonds and Stocks: Characteristics and Valuations

Securities and Markets

Financial Return and Risk Concepts

Business Organization and Financial Data

Financial Analysis and Long-Term Financial Planning

Managing Working Capital

Capital Budgeting Analysis

Capital Structure and the Cost of Capital

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