Exam 16: Current Liabilities Management

The outright sale of accounts receivable at a discount in order to obtain funds is called pledging accounts receivable.

A firm arranges a discount loan at a 12 percent interest rate, and borrows $100,000 for one year. The stated interest rate is ________ and the effective interest rate is ________.

Although more expensive than a line of credit, a revolving credit agreement can be less risky from the borrower's viewpoint.

As sales increase, a company needs more inventory and more employees resulting in ________.

A firm issued $2 million worth of commercial paper that has a 90-day maturity and sells for $1,900,000. The annual interest rate on the issue of commercial paper is ________ (assume 360 days in a year).

When a firm stretches accounts payable without hurting its credit rating, the cost of giving up a cash discount is ________.

________ are the major source of unsecured short-term financing for business firms.

Which of the following are the three basic ways of lending unsecured, short-term funds by commercial banks?

The interest paid by the issuer of commercial paper is determined by the size of the discount and the length of time to maturity.

The interest rate charged on secured short-term loans is always equal to the rate on unsecured short-term loans.

Jannet Company, currently pays its employees at the end of a week. The weekly payroll totals $400,000. If it were to extend the pay period so as to pay its employees 1 week later throughout an entire year, the employees would in effect be lending the firm ________ for a year.