Exam 16: Short-Term Business Financing

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

Which of the following are typical financing strategies used by businesses?

Tangshan Mining was extended credit terms of 3/15 net 30 EOM.The cost of giving up the cash discount,assuming payment would be made on the last day of the credit period,would be ________.If the firm were able to stretch its accounts payable to 60 days without damaging its credit rating,the cost of giving up the cash discount would only be ________.

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:

Inventory loans are less expensive than unsecured loans to business borrowers.

To compute the effective cost of a revolving agreement,the joint effect of interest on borrowed funds and commitment fees must be considered.

Which would not be likely to be accepted as collateral for an inventory loan?

Commercial banks lend unsecured short-term funds in the following three basic ways:

Pledging accounts receivable has all of the following characteristics except:

In general,short-term self-liquidating bank loans are intended to:

For most lines of business the basic source of short-term loan financing is:

Which is not a risk of short-term financing?

For bank loans,the effective interest rate is generally

When accounts receivable are factored: money is advanced to the borrower as a loan against accounts receivable;accounts receivable balances remain on the balance sheet;the customer payment is made to the firm,which then submits the payment to the bank;and interest is charged on the loan.

If a borrowing firm does not qualify for an unsecured bank loan and pledges its accounts receivable as security,it must execute an assignment of these accounts to the bank.

Ningbo Steel was extended credit terms of 3/15 net 30 EOM.The cost of giving up the cash discount,assuming payment would be made on the last day of the credit period,is 75.26 percent.If the firm were able to stretch its accounts payable to 60 days without damaging its credit rating,the cost of giving up the cash discount would only be

A firm's choice of financing strategy depends on a number of factors including its operating characteristics,cost,flexibility,and the ease of obtaining future financing.

Find the annualized cost of a commercial paper issue the has a $1,000,000 face value,matures in 180 days,has a placement fee of 1.5% and an interest charge of 8.5% over the 6 month period it is outstanding.

An acceptance is a receivable from the sale of merchandise on the basis of a draft or bill of exchange drawn against the buyer or the buyer's bank.

A line of credit is a legal obligation of the bank to provide funds up to the agreed-upon borrowing limit for a period of time.