Exam 15: Management of Current Liabilities

A field warehouse is

Appropriate collateral for a secured short-term loan is

The short-term self-liquidating loan is a secured short-term loan in which the borrowed money provides the mechanism through which the loan is repaid.

The risk to a Canadian importer with foreign currency denominated accounts payable is that the dollar will

Financing that arises from the normal operations of the firm are said to be

A firm has directly placed an issue of commercial paper that has a maturity of 60 days. The issuesold for $980,000 and has an annual interest rate of 12.24 percent. The value of the commercialpaper at maturity is ___________ .

The interest rate charged on a secured short-term loan to a corporation is typically __________the interest rate on an unsecured loan.

As part of a union negotiation agreement, the United Clerical Workers Union conceded to be paidevery two weeks instead of every week. A major firm employing hundreds of clerical workers hada weekly payroll of $1,000,000 and the cost of short-term funds was 12 percent. The effect of this concession was to delay clearing time by one week. Due to the concession, the firm

Lenders recognize that by having an interest in collateral they can reduce losses if the borrowingfirm defaults,

The commercial finance companies usually charge a higher interest on secured short-term loansthan commercial banks because the finance companies generally end up with higher-riskborrowers.

The prime rate of interest fluctuates with

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

A firm has a line of credit and borrows $25,000 at 9 percent interest for 180 days or half a year.What is the effective rate of interest on this loan if the interest is paid in advance?

Most commercial paper is purchased by

Factoring accounts receivable is not a form of secured short-term borrowing. It entails the sale ofaccounts receivable at a discount to obtain needed short-term funds.

The prime rate of interest fluctuates with changing supply-and-demand relationships for short-term funds as well as the risk of the bank's business borrowers.

The security agreement is the security offered the lender by the borrower, usually in the form of an asset such as accounts receivable or inventory.

A line of credit is an agreement between a commercial bank and a business specifying the amount of unsecured short-term borrowing the bank will make available to the firm over a given period of time.

Commercial paper is generally issued in multiples of

In credit terms, EOM (End-of-Month) indicates that the accounts payable must be paid by the end of the month in which the merchandise has been purchased.