Which One of the Following Statements Concerning Inventory Loans Is

question 299

Multiple Choice

Which one of the following statements concerning inventory loans is correct?

• A) A firm is required to hold inventory in a separate warehouse, which they are required to own under a warehouse financing arrangement.
• B) Financing for a large quantity of common items, such as small kitchen appliances, is often arranged under a trust receipt agreement with a financial institution.
• C) Financing for large ticket items, such as farm tractors, is generally done under a warehouse financing arrangement.
• D) Warehouse financing is ideally suited for inventories that improve with age such as whiskey or wine.
• E) Commercial paper is normally the preferred method of financing items such as aircraft.

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Definitions:

Specific Tax

A fixed amount of tax imposed on a product, service, or transaction, regardless of its price.

Competitive Market

A market structure characterized by a large number of buyers and sellers where no single participant can significantly influence the price of goods or services.

Demand Curve

A graph showing the relationship between the price of a good and the amount of the good that consumers are willing to purchase at that price.

Deadweight Loss

The reduction in economic efficiency that happens when equilibrium is not reached or is unattainable for a specific good or service.