Because Term Loans Are Negotiated Privately Between the Borrower and the Lender

question 60

True/False

Because term loans are negotiated privately between the borrower and the lender, they are much more expensive than the costs associated with floating a public debt or stock issue.

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Definitions:

Capital Budget

The process of planning and managing a company's long-term investments in major assets or projects.

Surplus Cash

Excess cash held by a company over and above its operating needs and plans, which can be invested or returned to shareholders.

Free Trade Credit

An arrangement where buyers can purchase goods and pay for them later without interest.

Net Purchases

The total amount of goods bought by a company during a period, minus any returns, allowances, or discounts.