Assume a Firm Takes Out a Discounted Loan with Its

question 131

True/False

Assume a firm takes out a discounted loan with its local bank.By the very nature of a discount loan, a compensating balance requirement will exist, and this will lead to a higher effective rate on this loan versus the loan's simple, or stated, rate.

---

Definitions:

Payment For It

This term refers to the act of disbursing money in exchange for goods or services.

Cash Receipts

The collection of money, either in the form of cash or checks, received by a business during its operations.

Receivables Period

The median days a company waits to receive money owed by customers for goods or services delivered on credit.

Payables Period

The payables period is a financial metric that indicates the average time it takes for a company to pay its suppliers and vendors.