Exam 12: Debt and Other Forms of Financing

It's safe to say that collection procedures are expensive and justifiable only when the expected results ______.

When a borrower instructs its customers to pay their invoices directly to the lender, the arrangement is called, "Pledging with notification."

If an entrepreneur wants more credit and would like to stretch out her payables, she can negotiate with her suppliers for more generous credit terms.

Which of the following is NOT a way to use inventory as security for a loan?

Which of the following sources of short term funding offer the highest degree of security to the lender.

The term, factoring, refers to selling accounts receivable at a discount to a finance company known as the factor.

Techniques for forecasting future sales are limited to methods that use external or economic information.

One way for entrepreneurs to stretch their payables (to take longer to pay bills) is to take discounts.

An entrepreneur only requires enough cash to cover needs under the most likely scenario he/she has forecasted.

Entrepreneurs requiring initial startup funding, generally seek capital from internal sources.

When paying for working capital shortfalls, entrepreneurs look for short-term cash at the lowest possible rates.

The vast majority of organizations experience a gap between the time when they have to pay suppliers and when they receive payment from customers. This gap is known as the cost cycle.

A chattel mortgage is a loan secured by specific assets.

Building up inventory typically reduces cash levels.

Accounts receivable represents liquid working capital that can be obtained prematurely without cost.

Some suppliers use generous terms on trade credit as a form of sales promotion. This is always less effective than an intensive advertising campaign or a high-pressure sales team.

Factoring with recourse implies that if a company does not pay its bill, the factor must absorb the loss.

What economic factor concerning the entrepreneur's product is the most significant for the company's credit policy?

Only a handful of very large firms have access to funding sources such as asset-backed debt securitizations, A-l commercial paper ratings, and below-prime lending rates.

Banks prefer 90-day maturities on short term loans in order to