Why Is It Necessary for a Business Firm to Put

question 236

Short Answer

Why is it necessary for a business firm to put up collateral when it takes out a loan?
So that the bank can keep a portion as advance payment on the loan
To show the bank that the business is big enough to require the loan
To assure the bank that loan payments will be made as promised
So the financial managers know dates of payment
So that the accounting people can generate accurate financial statements

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Definitions:

Budget Line

A visual representation of all the different combinations of two products that can be bought within a certain budget and price range.

Indifference Curve

A chart illustrating various pairings of two products that deliver the same level of enjoyment and usefulness to a buyer.

Budget Line

A graphical representation of all possible combinations of two goods that an individual can afford given their income and the prices of the goods.

Indifference Curve

A graph that shows different combinations of two goods or services among which a consumer is indifferent, illustrating preferences and trade-offs.