Exam 16: Obtaining Debt Capital

A bank's financing of installment note receivables is a non-recourse contract with the seller.

Which of the following is the most expensive source of financing?

Unlike equity investors,banks place very little weight on the quality of the management team.

'Resting the line' occurs when a bank cancels a line of credit to a customer.

A sales contract is financed by a bank that has recourse to the seller should the purchaser default on the loan.

Because banks may earn as little as one percent ________ on total assets,they are especially sensitive to the possibility of a loss.

Finance companies have reasonable prepayment penalties.

'Cleaning up' a line of credit means paying the line down to zero and holding a zero balance for one or two months.

Trade credit is reflected as what on the balance sheet?

Factoring is a cheap method for turning receivables into cash.

Leasing credit criteria are very similar to the criteria used by commercial banks for equipment loans.

The risk averse nature of commercial lending institutions is consistent with their

Owners of creditworthy companies with excellent records for timely repayment of interest and principal do not have to provide personal guarantees.

Finance companies install measure in their agreements that help insure that they will not be immediately replaced by banks when a borrower's credit profile improves.

The use of line of credit funds is more common in some industries than in others.

What is the advantage of dealing with a commercial finance company?

Loans made to finance improvements to business properties and plants are called ________ loans.

Leverage improves present value,but increases ________.

If a loan exceeds the limits of a local bank,part,or all,of the loan amount may be offered to ________ banks in neighboring communities and nearby financial centers.

In which of the following industries has factoring not become a common financial instrument?