Greg Approaches a Local Dealer to Buy a New Car

question 25

Multiple Choice

Greg approaches a local dealer to buy a new car which costs $10,000.He wishes to seek finance to buy the car.The auto dealer asks for a co-signer as surety to sell the car on credit.Greg approaches his friend Claire to co-sign on the agreement.Claire agrees and becomes a surety for Greg's car.Which of the following is true in this case?

• A) Claire is primarily liable for the payment.
• B) Claire is secondarily liable for the payment.
• C) Claire is liable only if the auto dealer has exhausted all other remedies.
• D) Claire is not liable for the payment.

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Definitions:

Debt Ratio

An indicator measuring a corporation's use of borrowing, obtained by dividing the sum of all liabilities by the sum of all assets.

Debt Financing

The means of raising capital through the sale of bonds, bills, or notes to individuals or institutions, in return for lending money to the borrowing entity.

Net Operating Income

A measure of a company's profitability from its regular business operations, excluding taxes and interest.

Interest Rate

Interest rate is the percentage of the principal amount charged by lenders for the use of their money or paid by banks for keeping money in an account.