Question 1

Firms are able to raise funds through the sale of commercial paper more cheaply than byborrowing from a commercial bank.

Accepted Answer

A) True 
 B)False  True

Question 2

The interest rate on a line of credit is normally stated as a fixed rate-the prime rate plus a percent.

Accepted Answer

A) True 
 B)False  False

Question 3

The primary source of secured short-term loans to businesses are

Accepted Answer

A)  savings and loans and factors. 
B)  commercial banks and commercial finance companies. 
C)  life insurance companies and government securities brokers. 
D)  commercial paper dealers and investment bankers. 
A)  savings and loans and factors. 
B)  commercial banks and commercial finance companies. 
C)  life insurance companies and government securities brokers. 
D)  commercial paper dealers and investment bankers. B

Question 4

A terminal warehouse is

Accepted Answer

A)  a central warehouse storing the merchandise of several businesses. 
B)  a warehouse on the borrower's premises. 
C)  a warehouse located at the airport. 
D)  a warehouse located near the lender. 
A)  a central warehouse storing the merchandise of several businesses. 
B)  a warehouse on the borrower's premises. 
C)  a warehouse located at the airport. 
D)  a warehouse located near the lender.

Question 5

One advantage of factoring accounts receivable is the ability it gives the firm to turn accounts receivable immediately into cash without having to worry about repayment.

Accepted Answer

A) True 
 B)False

Question 6

Generally the increment above the prime rate on a floating-rate loan will be higher than on a fixed-rate loan of equivalent risk because the lender bears higher risk with a floating-rate loan.

Accepted Answer

A) True 
 B)False

Question 7

Under a line of credit, a bank may require an annual cleanup, which means that the firm must pay off all its debts for a certain number of days during the year.

Accepted Answer

A) True 
 B)False

Question 8

XYZ Corporation borrowed $100,000 for six months from the bank. The rate is prime plus 2 percent. The prime rate was 8.5 percent at the beginning of the loan and changed to 9 percent after two months. This was the only change. How much interest must XYZ corporation pay?

Accepted Answer

A)  $18,212 
B)  $2,476 
C)  $5,417 
D)  $21,500 
A)  $18,212 
B)  $2,476 
C)  $5,417 
D)  $21,500

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

The cost of giving up a cash discount on a credit purchase is

Accepted Answer

A)  deducted from the price of the goods. 
B)  added on to the price of the goods. 
C)  the implied interest rate paid in order to delay payment for an additional number of days. 
D)  the true purchase price of the goods. 
A)  deducted from the price of the goods. 
B)  added on to the price of the goods. 
C)  the implied interest rate paid in order to delay payment for an additional number of days. 
D)  the true purchase price of the goods.

Question 11

The major type of loan made by banks to businesses is the

Accepted Answer

A)  fixed-asset-based loan. 
B)  capital improvement loan. 
C)  short-term secured loan. 
D)  short-term self-liquidating loan. 
A)  fixed-asset-based loan. 
B)  capital improvement loan. 
C)  short-term secured loan. 
D)  short-term self-liquidating loan.

Question 12

__________is a short-term, unsecured promissory note issued by firms with a high credit standing.These notes are primarily issued by commercial finance companies.

Accepted Answer

A)  A line of credit 
B)  Commercial paper 
C)  A self-liquidating loan 
D)  A revolving line of credit 
A)  A line of credit 
B)  Commercial paper 
C)  A self-liquidating loan 
D)  A revolving line of credit

Question 13

All of the following goods represent appropriate collateral for a secured loan to a school supplymanufacturer except

Accepted Answer

A)  index cards. 
B)  unbound pages. 
C)  notebooks and binders. 
D)  reams or rolls of paper. 
A)  index cards. 
B)  unbound pages. 
C)  notebooks and binders. 
D)  reams or rolls of paper.

Question 14

1/15 net 30 date of invoice translates as

Accepted Answer

A)  a one percent cash discount may be taken if paid in 15 days; if no cash discount is taken, the balance is due in 30 days after the middle of the month. 
B)  a one percent cash discount may be taken if paid in 15 days; if no cash discount is taken, the balance is due 30 days after the end of the month. 
C)  a one percent discount may be taken on 15 percent of the purchase if the account is paid within 30 days after the end of the month. 
D)  a one percent cash discount may be taken if paid in 15 days; if no cash discount is taken, the balance is due 30 days after the invoice date. 
A)  a one percent cash discount may be taken if paid in 15 days; if no cash discount is taken, the balance is due in 30 days after the middle of the month. 
B)  a one percent cash discount may be taken if paid in 15 days; if no cash discount is taken, the balance is due 30 days after the end of the month. 
C)  a one percent discount may be taken on 15 percent of the purchase if the account is paid within 30 days after the end of the month. 
D)  a one percent cash discount may be taken if paid in 15 days; if no cash discount is taken, the balance is due 30 days after the invoice date.

Question 15

The cost of giving up a cash discount is the implied rate of interest paid in order to delay payment of an account payable for an additional number of days.

Accepted Answer

A) True 
 B)False

Question 16

A revolving credit agreement is a form of financing consisting of short-term, unsecured promissory notes issued by firms with a high credit standing.

Accepted Answer

A) True 
 B)False

Question 17

A firm arranged for a 120-day bank loan at an annual rate of interest of 10 percent. If the loan is for$100,000, how much interest in dollars will the firm pay? (Assume a 360-day year.)

Accepted Answer

A)  $1,000 
B)  $10,000 
C)  $30,000 
D)  $3,333 
A)  $1,000 
B)  $10,000 
C)  $30,000 
D)  $3,333

Question 18

Under the floating inventory lien, the borrower is free to sell the merchandise and is expected to remit the amount loaned against each item, along with accrued interest, to the lender immediately after the sale. The lender then releases the lien on the appropriate item.

Accepted Answer

A) True 
 B)False

Question 19

Self-liquidating loans are mainly invested in productive assets (i.e., fixed assets) which provide themechanism through which the loan is repaid.

Accepted Answer

A) True 
 B)False

Question 20

Loans on which the interest is paid in advance are often called

Accepted Answer

A)  premium loans. 
B)  discount loans. 
C)  reduced-principle loans. 
D)  called loans. 
A)  premium loans. 
B)  discount loans. 
C)  reduced-principle loans. 
D)  called loans.

Firms are able to raise funds through the sale of commercial paper more cheaply than byborrowing from a commercial bank.

The interest rate on a line of credit is normally stated as a fixed rate-the prime rate plus a percent.

The primary source of secured short-term loans to businesses are

A terminal warehouse is

One advantage of factoring accounts receivable is the ability it gives the firm to turn accounts receivable immediately into cash without having to worry about repayment.

Generally the increment above the prime rate on a floating-rate loan will be higher than on a fixed-rate loan of equivalent risk because the lender bears higher risk with a floating-rate loan.

Under a line of credit, a bank may require an annual cleanup, which means that the firm must pay off all its debts for a certain number of days during the year.

XYZ Corporation borrowed $100,000 for six months from the bank. The rate is prime plus 2 percent. The prime rate was 8.5 percent at the beginning of the loan and changed to 9 percent after two months. This was the only change. How much interest must XYZ corporation pay?

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 cost of giving up a cash discount on a credit purchase is

The major type of loan made by banks to businesses is the

__________is a short-term, unsecured promissory note issued by firms with a high credit standing.These notes are primarily issued by commercial finance companies.

All of the following goods represent appropriate collateral for a secured loan to a school supplymanufacturer except

1/15 net 30 date of invoice translates as

The cost of giving up a cash discount is the implied rate of interest paid in order to delay payment of an account payable for an additional number of days.

A revolving credit agreement is a form of financing consisting of short-term, unsecured promissory notes issued by firms with a high credit standing.

A firm arranged for a 120-day bank loan at an annual rate of interest of 10 percent. If the loan is for$100,000, how much interest in dollars will the firm pay? (Assume a 360-day year.)

Under the floating inventory lien, the borrower is free to sell the merchandise and is expected to remit the amount loaned against each item, along with accrued interest, to the lender immediately after the sale. The lender then releases the lien on the appropriate item.

Self-liquidating loans are mainly invested in productive assets (i.e., fixed assets) which provide themechanism through which the loan is repaid.

Loans on which the interest is paid in advance are often called

Overview of Corporate Finance

Financial Statements, Cash Flows, and Taxes

Financial Statement Analysis

Financial Planning and Forecasting

Financial Markets, Institutions, and Securities

Time Value of Money

Risk and Return

Valuation of Financial Securities

The Cost of Capital

Leverage and Capital Structure

Dividend Policy

Capital Budgeting: Principles and Techniques

Dealing With Project Risk and Other Topics in Capital Budgeting

Working Capital and Management of Current Assets

Lease Financing: Concepts and Techniques

Corporate Securities, Derivatives, and Swaps

Mergers and Acquisitions, and Business Failure

International Corporate Finance

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Exam 15: Management of Current Liabilities

Firms are able to raise funds through the sale of commercial paper more cheaply than byborrowing from a commercial bank.

The interest rate on a line of credit is normally stated as a fixed rate-the prime rate plus a percent.

The primary source of secured short-term loans to businesses are

A terminal warehouse is

One advantage of factoring accounts receivable is the ability it gives the firm to turn accounts receivable immediately into cash without having to worry about repayment.

Generally the increment above the prime rate on a floating-rate loan will be higher than on a fixed-rate loan of equivalent risk because the lender bears higher risk with a floating-rate loan.

Under a line of credit, a bank may require an annual cleanup, which means that the firm must pay off all its debts for a certain number of days during the year.

XYZ Corporation borrowed $100,000 for six months from the bank. The rate is prime plus 2 percent. The prime rate was 8.5 percent at the beginning of the loan and changed to 9 percent after two months. This was the only change. How much interest must XYZ corporation pay?

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 cost of giving up a cash discount on a credit purchase is

The major type of loan made by banks to businesses is the

__________is a short-term, unsecured promissory note issued by firms with a high credit standing.These notes are primarily issued by commercial finance companies.

All of the following goods represent appropriate collateral for a secured loan to a school supplymanufacturer except

1/15 net 30 date of invoice translates as

The cost of giving up a cash discount is the implied rate of interest paid in order to delay payment of an account payable for an additional number of days.

A revolving credit agreement is a form of financing consisting of short-term, unsecured promissory notes issued by firms with a high credit standing.

A firm arranged for a 120-day bank loan at an annual rate of interest of 10 percent. If the loan is for$100,000, how much interest in dollars will the firm pay? (Assume a 360-day year.)

Under the floating inventory lien, the borrower is free to sell the merchandise and is expected to remit the amount loaned against each item, along with accrued interest, to the lender immediately after the sale. The lender then releases the lien on the appropriate item.

Self-liquidating loans are mainly invested in productive assets (i.e., fixed assets) which provide themechanism through which the loan is repaid.

Loans on which the interest is paid in advance are often called

Overview of Corporate Finance

Financial Statements, Cash Flows, and Taxes

Financial Statement Analysis

Financial Planning and Forecasting

Financial Markets, Institutions, and Securities

Time Value of Money

Risk and Return

Valuation of Financial Securities

The Cost of Capital

Leverage and Capital Structure

Dividend Policy

Capital Budgeting: Principles and Techniques

Dealing With Project Risk and Other Topics in Capital Budgeting

Working Capital and Management of Current Assets

Lease Financing: Concepts and Techniques

Corporate Securities, Derivatives, and Swaps

Mergers and Acquisitions, and Business Failure

International Corporate Finance

Filters