BU121 Chapter Notes - Chapter 5: Financial Institution, Accounts Receivable
Document Summary
Unsecured loans: loans for which the borrower does not have to pledge specific assets as security, 3 main types of unsecured loans: Trade credit: credit to the buyer for items they purchase from the seller. Commercial paper: iou issued by a financially strong corporation: an agreement between a bank and a person that specifies the maximum amount of short-term borrowing the bank will make available for the person. Revolving credit agreement: a line of credit that allows the borrow to have access to funds again once they have been repaid. Secured loans: loans for which a borrower is required to pledge specific assets as collateral. Factoring: a form of short-term financing in which a company sells its accounts receivable at a discount to a factor, a financial institution. Debt has a stated maturity and requires repayment of principal. Equity owners have a residual claim on income and assets. The company is not required to repay equity, no maturity.
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