Short Term Financing MCQs

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Which one of the following is a spontaneous source of financing?






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Which one of the following provides a spontaneous source of financing for a firm?






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Which one of the following statements about trade credit is correct? Trade credit is






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Which one of the following financial instruments generally provides the largest source of short-term credit for small firms?






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Richardson Supply has a $100 invoice with payment terms of 2/10, net 60. Richardson can either take the discount or place the funds in a money market ...






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Which one of the following statements concerning cash discounts is correct?






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When a company offers credit terms of 3/10, net 30, the annual interest cost based on a 360-day year is






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Maple Motors buys axles in order to produce automobiles. Maple carries an average credit balance of $25,000,000 with its axle supplier. The axle suppl...






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Garo Company, a retail store, is considering forgoing sales discounts to delay using its cash. Supplier credit terms are 2/10, net 30. Assuming a 360-...






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When a company offers credit terms of 2/10, net 30, the annual interest cost, based on a 360-day year, is






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The high cost of short-term financing has recently caused a company to reevaluate the terms of credit it extends to its customers. The current policy ...






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Which one of the following responses is not an advantage to a corporation that uses the commercial paper market for short-term financing?






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Commercial paper






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What is the effective annual interest rate for a 1-year $100 million loan with a stated interest rate of 8.00%, if the lending bank requires a non-int...






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The following forms of short-term borrowing are available to a firm: Floating lien Factoring Revolving credit Chattel mortgages Bankers acc...






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Short-term, unsecured promissory notes issued by large firms are known as






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With respect to the use of commercial paper by an industrial firm, which one of the following statements is most likely to be true?






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Corbin, Inc., can issue 3-month commercial paper with a face value of $1,000,000 for $980,000. Transaction costs will be $1,200. The effective annuali...






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Randy, Inc., can issue 3-month commercial paper with a face value of $1,500,000 for $1,450,000. Transaction costs will be $1,500. The effective annual...






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Morton Company needs to pay a suppliers invoice of $50,000 and wants to take a cash discount of 2/10, net 40. The firm can borrow the money for 30 da...






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Morton Company needs to pay a suppliers invoice of $50,000 and wants to take a cash discount of 2/10, net 40. The firm can borrow the money for 30 da...






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Skilantic Company needs to pay a suppliers invoice of $60,000 and wants to take a cash discount of 2/10, net 40. The firm can borrow the money for 30...






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Skilantic Company needs to pay a suppliers invoice of $60,000 and wants to take a cash discount of 2/10, net 40. The firm can borrow the money for 30...






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Skilantic Company needs to pay a suppliers invoice of $60,000 and wants to take a cash discount of 2/10, net 40. The firm can borrow the money for 30...






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A company has just borrowed $2 million from a bank. The stated rate of interest is 10%. If the loan is discounted and is repayable in 1 year, the effe...






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On January 1, Scott Corporation received a $300,000 line of credit at an interest rate of 12% from Main Street Bank and drew down the entire amount on...






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Hagar Companys bank requires a compensating balance of 20 on a $100,000 loan. If the stated interest on the loan is 7%, what is the effective cost of...






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A company obtained a short-term bank loan of $250,000 at an annual interest rate of 6%. As a condition of the loan, the company is required to maintai...






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A company obtained a short-term bank loan of $500,000 at an annual interest rate of 8%. As a condition of the loan, the company is required to maintai...






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A manufacturing firm wants to obtain a short-term loan and has approached several lending institutions. All of the potential lenders are offering the ...






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The prime lending rate of commercial banks is an announced rate and is often understated from the viewpoint of even the most credit-worthy firms. Whic...






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The prime rate is the






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A small retail business would most likely finance its merchandise inventory with






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If a firm borrows $500,000 at 10% and is required to maintain $50,000 as a minimum compensating balance at the bank, what is the effective interest ra...






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The Dixon Corporation has an outstanding 1-year bank loan of $300,000 at a stated interest rate of 8%. In addition, Dixon is required to maintain a 20...






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Elan Corporation is considering borrowing $100,000 from a bank for 1 year at a stated interest rate of 9%. What is the effective interest rate to Elan...






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The Altmane Corporation was recently quoted terms on a commercial bank loan of 7% discounted interest with a 20% compensating balance. The term of the...






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The Flesher Corporation was recently quoted terms on a commercial bank loan of 6% discounted interest with a 22% compensating balance. The term of the...






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The Red Company has a revolving line of credit of $300,000 with a 1-year maturity. The terms call for a 6% interest rate and a 1/2% commitment fee on ...






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An example of secured short-term financing is






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A firm that often factors its accounts receivable has an agreement with its finance company that requires the firm to maintain a 6% reserve and charge...






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A firm that often factors its accounts receivable has an agreement with its finance company that requires the firm to maintain a 6% reserve and charge...






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The Frame Supply Company has just acquired a large account and needs to increase its working capital by $100,000. The controller of the company has id...






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The Frame Supply Company has just acquired a large account and needs to increase its working capital by $100,000. The controller of the company has id...






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The Frame Supply Company has just acquired a large account and needs to increase its working capital by $100,000. The controller of the company has id...






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A company enters into an agreement with a firm that will factor the companys accounts receivable. The factor agrees to buy the companys receivables,...






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The chief financial officer of Smith Glass, Inc., follows the policy of matching the maturity of assets with the maturity of financing. The implicatio...






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A manufacturer with seasonal sales would be most likely to obtain which one of the following types of loans from a commercial bank to finance the need...






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Which of the following financing vehicles would a commercial bank be likely to offer to its customers? I. Discounted notes II. Term loans III. Line...






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On June 30 of this year, Mega Bank granted Lang Corporation a $20 million 5-year term loan with a floating rate of 200 basis points over Treasury Bill...






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Global Manufacturing Company has a cost of borrowing of 12 . One of the firms suppliers has just offered new terms for purchases. The old terms were ...






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Dexter Products receives $25,000 worth of merchandise from its major supplier on the 15th and 30th of each month. The goods are sold on terms of 1/15,...






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Dudley Products is given terms of 2/10, net 45 by its suppliers. If Dudley forgoes the cash discount and instead pays the suppliers 5 days after the n...






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A firm is given payment terms of 3/10, net 90 and forgoes the discount and pays on the net due date. Using a 360-day year and ignoring the effects of ...






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Gates, Inc., has been offered a 1-year loan by its commercial bank. The instrument is a discounted note with a stated interest rate of 9%. If Gates ne...






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Lang National Bank offered a 1-year loan to a commercial customer. The instrument is a discounted note with a nominal rate of 12%. What is the effecti...






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Keller Products needs $150,000 of additional funds over the next year in order to satisfy a significant increase in demand. A commercial bank has offe...






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Approximately what amount of compensating balance would be required for a stated interest rate of 10% to equal an effective interest rate of 10.31% on...






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The effective annual interest rate to the borrower of a $100,000 1-year loan with a stated rate of 7% and a 20% compensating balance is






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Which one of the following could be used to provide security to the lender in an inventory financing situation?






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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 ...






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Buckeye Lawn Maintenance is a seasonal business and has decided to finance seasonal variations in current assets with short-term debt while financing ...






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






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A person invested Rs. 100000 in a bank FDR @ 6% p.a. for 1 year. If interest is compounded on half yearly basis, the amount payable shall be ...... ...






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Ranjit borrowed an amount of Rs. 50000 for 8 years @ 18% roi. What shall be monthly payment?