Question 1

If a firm actually sells its accounts receivable,the process is known as:

Accepted Answer

A) wholesale financing 
B) floor planning 
C) field crediting 
D) factoring 
A) wholesale financing 
B) floor planning 
C) field crediting 
D) factoring

Question 2

A short-term bank loan that is unsecured is referred to as:

Accepted Answer

A) a line of credit 
B) an accounts-receivable loan 
C) an inventory loan 
D) a life insurance policy loan 
A) a line of credit 
B) an accounts-receivable loan 
C) an inventory loan 
D) a life insurance policy loan

Question 3

A __________________ is a claim against a customer's inventory when the individual items are indistinguishable.

Accepted Answer

A) floor plan receipt 
B) trust receipt 
C) warehouse receipt 
D) blanket inventory lien 
A) floor plan receipt 
B) trust receipt 
C) warehouse receipt 
D) blanket inventory lien

Question 4

Under ___________________ a factor pays the firm for its receivables before the account due date.

Accepted Answer

A) reverse factoring 
B) maturity factoring 
C) advance factoring 
D) nonrecourse factoring 
A) reverse factoring 
B) maturity factoring 
C) advance factoring 
D) nonrecourse factoring

Question 5

Assume that Ningbo Steel borrows $1,000,000 for one year under a line of credit with a stated interest rate of 8.5 percent and a 15 percent compensating balance and that the firm keeps no money on deposit in its checking account.Based on this information,the effective annual interest rate on the loan is

Accepted Answer

A) 8.8%. 
B) 8.6%. 
C) 8.4%. 
D) 8.2%. 
E) none of the above 
A) 8.8%. 
B) 8.6%. 
C) 8.4%. 
D) 8.2%. 
E) none of the above

Question 6

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 7

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

Accepted Answer

A) provide greater convenience for their clients than bank borrowing but at rates somewhat higher than bank rates 
B) set rates at the beginning of the month 
C) recall notes that have been placed with investors if rates change dramatically 
D) none of the above is a characteristic of commercial paper dealers 
A) provide greater convenience for their clients than bank borrowing but at rates somewhat higher than bank rates 
B) set rates at the beginning of the month 
C) recall notes that have been placed with investors if rates change dramatically 
D) none of the above is a characteristic of commercial paper dealers

Question 8

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.

Accepted Answer

A) $8,000 
B) $9,800 
C) $9,000 
D) $10,000 
E) none of the above 
A) $8,000 
B) $9,800 
C) $9,000 
D) $10,000 
E) none of the above

Question 9

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

Accepted Answer

A) field warehouse firm 
B) commercial finance company 
C) factor 
D) commercial paper house 
A) field warehouse firm 
B) commercial finance company 
C) factor 
D) commercial paper house

Question 10

Permanent current assets are:

Accepted Answer

A) accounts receivable that have become bad debts 
B) inventories that have become obsolete 
C) the level of current assets equal to fixed assets 
D) the level of current assets needed to support sales 
A) accounts receivable that have become bad debts 
B) inventories that have become obsolete 
C) the level of current assets equal to fixed assets 
D) the level of current assets needed to support sales

Question 11

If life insurance is pledged as collateral for a loan,how much can be borrowed?

Accepted Answer

A) face value of the policy 
B) cash surrender of the policy 
C) an amount equal to the annual premium 
D) none of the above 
A) face value of the policy 
B) cash surrender of the policy 
C) an amount equal to the annual premium 
D) none of the above

Question 12

When a bank takes a business' inventory as collateral for additional loans,it:

Accepted Answer

A) places the inventory under bond 
B) transports the inventory to a warehouse not necessarily on bank property 
C) requires insurance and weekly audits of the inventory 
D) usually establishes a field warehouse 
A) places the inventory under bond 
B) transports the inventory to a warehouse not necessarily on bank property 
C) requires insurance and weekly audits of the inventory 
D) usually establishes a field warehouse

Question 13

The effective annual interest rate on a one-year,$1,000,000,12% discount loan that requires a 10% compensating balance is

Accepted Answer

A) 16.0%. 
B) 13.3%. 
C) 13.6%. 
D) 12.0%. 
E) none of the above 
A) 16.0%. 
B) 13.3%. 
C) 13.6%. 
D) 12.0%. 
E) none of the above

Question 14

Firms using maturity matching will have current ratios equal to 1.0.

Accepted Answer

A) True 
 B)False

Question 15

The factor,unlike the commercial finance company:

Accepted Answer

A) engages in accounts receivable financing 
B) purchases the accounts receivable outright 
C) assumes limited credit risks 
D) is not responsible for the collection of accounts 
A) engages in accounts receivable financing 
B) purchases the accounts receivable outright 
C) assumes limited credit risks 
D) is not responsible for the collection of accounts

Question 16

In general,

Accepted Answer

A) a revolving credit agreement is equally as expensive but less risky to the firm than a line of credit. 
B) a revolving credit agreement is equally as expensive and more risky to the firm than a line of credit. 
C) a revolving credit agreement is less expensive and less risky to the firm than a line of credit. 
D) a revolving credit agreement is less expensive but more risky to the firm than a line of credit. 
E) none of the above 
A) a revolving credit agreement is equally as expensive but less risky to the firm than a line of credit. 
B) a revolving credit agreement is equally as expensive and more risky to the firm than a line of credit. 
C) a revolving credit agreement is less expensive and less risky to the firm than a line of credit. 
D) a revolving credit agreement is less expensive but more risky to the firm than a line of credit. 
E) none of the above

Question 17

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. 
E) none of the above 
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. 
E) none of the above

Question 18

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) $110,000 
B) $111,111 
C) $100,000 
D) $90,000 
A) $110,000 
B) $111,111 
C) $100,000 
D) $90,000

Question 19

The most important form of short-term business financing is:

Accepted Answer

A) a revolving credit agreement 
B) accounts-receivable financing 
C) inventory loans 
D) trade credit 
A) a revolving credit agreement 
B) accounts-receivable financing 
C) inventory loans 
D) trade credit

Question 20

If a firm has positive net working capital,the current ratio is:

Accepted Answer

A) greater than one 
B) less than one 
C) equal to one 
D) not enough information given to tell 
A) greater than one 
B) less than one 
C) equal to one 
D) not enough information given to tell

If a firm actually sells its accounts receivable,the process is known as:

A short-term bank loan that is unsecured is referred to as:

A __________________ is a claim against a customer's inventory when the individual items are indistinguishable.

Under ___________________ a factor pays the firm for its receivables before the account due date.

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

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

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.

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

Permanent current assets are:

If life insurance is pledged as collateral for a loan,how much can be borrowed?

When a bank takes a business' inventory as collateral for additional loans,it:

The effective annual interest rate on a one-year,$1,000,000,12% discount loan that requires a 10% compensating balance is

Firms using maturity matching will have current ratios equal to 1.0.

The factor,unlike the commercial finance company:

In general,

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 most important form of short-term business financing is:

If a firm has positive net working capital,the current ratio is:

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 Valuation

Securities 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

If a firm actually sells its accounts receivable,the process is known as:

A short-term bank loan that is unsecured is referred to as:

A __________________ is a claim against a customer's inventory when the individual items are indistinguishable.

Under ___________________ a factor pays the firm for its receivables before the account due date.

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

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

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.

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

Permanent current assets are:

If life insurance is pledged as collateral for a loan,how much can be borrowed?

When a bank takes a business' inventory as collateral for additional loans,it:

The effective annual interest rate on a one-year,$1,000,000,12% discount loan that requires a 10% compensating balance is

Firms using maturity matching will have current ratios equal to 1.0.

The factor,unlike the commercial finance company:

In general,

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 most important form of short-term business financing is:

If a firm has positive net working capital,the current ratio is:

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 Valuation

Securities 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

Filters