Short Term Financing Paper 7


Topka, Inc., needs to borrow $500,000 to meet its working capital requirements for next year. The Merchant Bank has offered the company a 9.5% simple interest loan that has a 16% compensating balance requirement. Determine the effective interest rate for the loan.


Buckeye Lawn Maintenance is a seasonal business and has decided to finance seasonal variations in current assets with short-term debt while financing the permanent component of current assets and all fixed assets with long-term debt or equity. Which one of the following best describes this type of financing?


Which one of the following is not a form of short-term credit?


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