Question 1

The Small Business Administration assists in the financing of small businesses in which of the following ways?

Accepted Answer

A)  making direct loans to businesseslimit interest rates charged on a SBA loan
B)  participating jointly with banks in extending loans to businesses
C)  guaranteeing bank loans to businesses
D)  all the above

Question 2

Commercial banks lend unsecured short-term funds in the following three basic ways:

Accepted Answer

A)  Commercial paper, lines of credit, and revolving credit agreements.
B)  Single-payment note, revolving credit agreements, and revolving credit agreementscommercial paper.
C)  Single-payment note, lines of credit, and evolving trade credit agreements.
D)  Commercial papertrade, lines of credit, and revolving compensating balances.
E)  none of the above

Question 3

Which of the following is not a characteristic of a commercial finance company?

Accepted Answer

A)  	advances funds to business concerns by discounting accounts receivable
B)  	makes loans secured by chattel mortgages on machinery
C)  	finances deferred-payment sales of commercial and industrial equipment
D)  	holds a bank charter

Question 4

Which would not be likely to be accepted as collateral for an inventory loan?

Accepted Answer

A)  nails at a hardware store
B)  cars at an automobile dealership
C)  clothing at a fashion store
D)  all the above would be likely to be accepted

Question 5

Which of the following organizations are involved in accounts receivable financing for businesses?

Accepted Answer

A)  consumer finance companies
B)  commercial finance companies
C)  factors
D)  commercial finance companies and factors

Question 6

Assume that Ningbo Steel borrows $2,000,000 for one year under a line of credit with a stated interest rate of 9.5 percent and a 10 percent compensating balance and that the firm keeps no money on deposit in its checking account. Based on this information, the effective annual interest rate on the loan is

Accepted Answer

A)  	19.5%.
B)  	21.1%.
C)  	11.1%.
D)  	10.6%.
E)  	none of the above

Question 7

Find the annualized cost of a commercial paper issue the has a $1,000,000 face value, matures in 180 days, has a placement fee of 1.5% and an interest charge of 8.5% over the 6 month period it is outstanding.

Accepted Answer

A)  10%
B)  11.1%
C)  23.5%
D)  none of the above

Question 8

Compensating balances decrease the effective cost of borrowing.

Accepted Answer

A) True 
 B)False

Question 9

A commercial finance company:

Accepted Answer

A)  has a bank charter
B)  may not discount accounts receivable
C)  may make loans secured by chattel mortgages
D)  none of the above

Question 10

The effective annual interest rate on a one-year, $1,000,000, 12% discount loan that requires a 10% compensating balance is

Accepted Answer

A)  15.422%.
B)  13.3%.
C)  13.6%.
D)  12.0%.
E)  none of the above

Question 11

A __________________ is a claim against a customer's inventory when the individual items are indistinguishable.

Accepted Answer

A)  floor plan receipt
B)  trust receipt
C)  warehouse receipt
D)  blanket inventory lien

Question 12

Which of the following might be a characteristic of a field warehouse?

Accepted Answer

A)  it serves a single customer
B)  it exists only until the loan is repaid
C)  a lease on that portion of the property which is to be used for warehousing purposes must be obtained
D)  all the above
E)  none of the above

Question 13

For most lines of business the basic source of short-term loan financing is:

Accepted Answer

A)  commercial banks
B)  finance companies
C)  the commercial paper market
D)  factors

Question 14

The largest providers of short-term financing are:

Accepted Answer

A)  commercial banks
B)  commercial finance companies
C)  factors
D)  none of the above

Question 15

Short-term financing offers greater flexibility than long-term financing.

Accepted Answer

A) True 
 B)False

Question 16

Permanent current assets reflect the minimum investment level in cash, accounts receivable, and inventories needed to support sales.

Accepted Answer

A) True 
 B)False

Question 17

Higher financing cost and lower risk of not being able to borrow when short-term funds are needed are characteristics of:

Accepted Answer

A)  aggressive financing
B)  conservative financing
C)  maturity matching
D)  none of the above

Question 18

Inventory loans are less expensive than unsecured loans to business borrowers.

Accepted Answer

A) True 
 B)False

Question 19

In general, short-term self-liquidating bank loans are intended to: None of the above clone of prior item

Accepted Answer

A)  help recapitalize a company.
B)  help a company finance merger & acquisitions.
C)  help a company finance annual shareholder meetings.
D)  help a company finance investment in capital assets.
E)  none of the above

Question 20

Stocks and bonds are rarely used as collateral for short-term loans.

Accepted Answer

A) True 
 B)False

Exam 16: Short-Term Business Financing

Which of the following is not a characteristic of a commercial finance company?

Correct Answer
verified

A commercial finance company:

Correct Answer
verified

For most lines of business the basic source of short-term loan financing is:

Correct Answer
verified

In general, short-term self-liquidating bank loans are intended to: None of the above clone of prior item

Correct Answer
verified

The effective annual interest rate on a one-year, $1,000,000, 12% discount loan that requires a 10% compensating balance is

Correct Answer
verified

The Small Business Administration assists in the financing of small businesses in which of the following ways?

Correct Answer
verified

Which would not be likely to be accepted as collateral for an inventory loan?

Correct Answer
verified

Short-term financing offers greater flexibility than long-term financing.

Correct Answer
verified

Stocks and bonds are rarely used as collateral for short-term loans.

Correct Answer
verified

Find the annualized cost of a commercial paper issue the has a $1,000,000 face value, matures in 180 days, has a placement fee of 1.5% and an interest charge of 8.5% over the 6 month period it is outstanding.

Correct Answer
verified

Which of the following organizations are involved in accounts receivable financing for businesses?

Correct Answer
verified

Higher financing cost and lower risk of not being able to borrow when short-term funds are needed are characteristics of:

Correct Answer
verified

The largest providers of short-term financing are:

Correct Answer
verified

A __________________ is a claim against a customer's inventory when the individual items are indistinguishable.

Correct Answer
verified

Commercial banks lend unsecured short-term funds in the following three basic ways:

Correct Answer
verified

Inventory loans are less expensive than unsecured loans to business borrowers.

Correct Answer
verified

Which of the following might be a characteristic of a field warehouse?

Correct Answer
verified

Correct Answer
verified

Permanent current assets reflect the minimum investment level in cash, accounts receivable, and inventories needed to support sales.

Correct Answer
verified

Compensating balances decrease the effective cost of borrowing.

Correct Answer
verified

Exam 16: Short-Term Business Financing

Which of the following is not a characteristic of a commercial finance company?

Correct AnswerverifiedShow Answer

A commercial finance company:

Correct AnswerverifiedShow Answer

For most lines of business the basic source of short-term loan financing is:

Correct AnswerverifiedShow Answer

In general, short-term self-liquidating bank loans are intended to: None of the above clone of prior item

Correct AnswerverifiedShow Answer

The effective annual interest rate on a one-year, $1,000,000, 12% discount loan that requires a 10% compensating balance is

Correct AnswerverifiedShow Answer

The Small Business Administration assists in the financing of small businesses in which of the following ways?

Correct AnswerverifiedShow Answer

Which would not be likely to be accepted as collateral for an inventory loan?

Correct AnswerverifiedShow Answer

Short-term financing offers greater flexibility than long-term financing.

Correct AnswerverifiedShow Answer

Stocks and bonds are rarely used as collateral for short-term loans.

Correct AnswerverifiedShow Answer

Find the annualized cost of a commercial paper issue the has a $1,000,000 face value, matures in 180 days, has a placement fee of 1.5% and an interest charge of 8.5% over the 6 month period it is outstanding.

Correct AnswerverifiedShow Answer

Which of the following organizations are involved in accounts receivable financing for businesses?

Correct AnswerverifiedShow Answer

Higher financing cost and lower risk of not being able to borrow when short-term funds are needed are characteristics of:

Correct AnswerverifiedShow Answer

The largest providers of short-term financing are:

Correct AnswerverifiedShow Answer

A __________________ is a claim against a customer's inventory when the individual items are indistinguishable.

Correct AnswerverifiedShow Answer

Commercial banks lend unsecured short-term funds in the following three basic ways:

Correct AnswerverifiedShow Answer

Inventory loans are less expensive than unsecured loans to business borrowers.

Correct AnswerverifiedShow Answer

Which of the following might be a characteristic of a field warehouse?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Permanent current assets reflect the minimum investment level in cash, accounts receivable, and inventories needed to support sales.

Correct AnswerverifiedShow Answer

Compensating balances decrease the effective cost of borrowing.

Correct AnswerverifiedShow Answer

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