Question

Your firm needs to borrow $50,000 for one year. Which of the following loan options offers the least cost?

Select one:

A. 13 ? % simple interest

B. 10 ? % discount interest with a 10% compensating balance requirement

C. 12 ? % discount interest

D. 11% simple interest with a 20% compensating balance requirement

Question 6

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A firm changes its credit policy from 2/10, net 30, to 3/10, net 30. The change is meant to match the competition??s recent changes, so no increase in sales is expected. Average accounts receivable will probably decline as a result of this change.

Select one:

True

False

Question 7

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Which of the following statements is most correct?

Select one:

A. Trade credit is provided to a business when purchases are made

B. Short-term debt, while often cheaper than long-term debt, exposes a firm to the potential problem associated with interest rate risk

C. Both statements 1 and 2 are false

D. Both statements 1 and 2 are correct

Question 8

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Accruals represent a spontaneous source of funding but, unfortunately, due to law and economic forces, firms have little control over the level of these accounts.

Select one:

True

False