Exam 15: Management of Current Liabilities

__________are liabilities for services received for which payment has yet to be made. The most common accounts are taxes and wages.

The discount rate is the lowest rate of interest charged by the nation's leading banks on business loans to their most important and reliable business borrowers.

The interest rate charged on secured short-term loans to a corporation is generally higher than that charged on unsecured short-term loans because

Appropriate collateral for a loan secured under a floating inventory lien is

A ___________ guarantees the borrower that a specified amount of funds will be available regardless of the tightness of money.

The cost of borrowing through the sale of commercial paper is typically__________ the prime bank loan rate.

Fixed assets are the most desirable short-term loan collateral since they normally have a longer life, or duration, than the term of the loan.

In a line of credit arrangement, the firm pays interest on

If the firm decides to take the cash discount that is offered on goods purchased on credit, the firm should

The higher cost of unsecured as opposed to secured borrowing is due to the greater risk of default.

A fixed-rate loan is a loan whose rate of interest is established at a fixed increment above the prime rate and is allowed to vary above prime only when the prime rate varies until maturity.

Seasonal buildups of inventory and receivables are generally financed with

__________ensure that money loaned under a line of credit agreement is actually being used to finance seasonal needs.

A trust receipt inventory loan is an arrangement in which the lender receives control of the pledged inventory collateral, which is warehoused by a designated agent.

The major attraction of a line of credit from the bank's point of view is that it eliminates the need to examine the credit worthiness of a customer each time it borrows money.

The cost of giving up a cash discount under the terms of sale 1/10 net 60 (assume a 360-day year) is

Which of the following is NOT an advantage of factoring?

In doing business in foreign countries, financing operations in the local market not only improves the company's business ties to the host community but also minimizes exchange rate risk.

In a revolving credit agreement, the firm pays interest on

The__________ is the lowest rate of interest charged on business loans to the best business borrowers by the nation's leading banks.