Lending Institutions May Offer a Borrower a Percentage of the Value

question 103

Multiple Choice

Lending institutions may offer a borrower a percentage of the value of the borrower's accounts receivable so the borrowing firm can continue to operate while it waits to collect on its credit sales. This process is called __________

• A) establishing a line of credit.
• B) inventory valuation.
• C) pledging.
• D) revolving credit.

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Definitions:

Cash Flows

The overall volume of cash inflows and outflows within a corporation, significantly affecting its liquid assets.

Operating Activities

The day-to-day actions that are involved in running a business, such as buying, selling, and producing goods or services.

Indirect Method

A way of preparing the statement of cash flows where net income is adjusted for changes in balance sheet accounts to calculate the cash from operating activities.

Operating

Refers to the day-to-day activities involved in running a business that are essential for generating revenue.