Ralph Owns a Lumber Yard and Has a $500,000 Purchase

question 28

Multiple Choice

Ralph owns a lumber yard and has a $500,000 purchase order from a construction company. His cost of goods sold for this order is $300,000. Because his company needs working capital, the most logical loan for the lumber yard would be to use

• A) an equipment-based loan.
• B) factoring.
• C) purchase-order financing.
• D) asset-based financing.

---

Definitions:

Intangible Assets

Non-physical assets that have value, such as intellectual property, trademarks, goodwill, and brand recognition.

Amortization

The gradual reduction or the expensing of an intangible asset's cost over its useful life, similar to depreciation for tangible assets.

Fair Market Value

The price at which an asset would sell in the marketplace between a willing buyer and a willing seller, each having reasonable knowledge of the pertinent facts.

Trade-In Allowance

The amount credited to the buyer of a new item for the value of the old item that is being traded in as part of the transaction.