When a Loan Is Discounted, to Receive the Desired Usable

question 12

True/False

When a loan is discounted, to receive the desired usable funds, the loan request must equal Desired usable funds x (1 - Discount).

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Definitions:

Sale of Assets

The process of selling company properties, plant, and equipment to generate cash.

Bondholder Claims

The rights or entitlements that bondholders have to receive payments of principal and interest, as well as their place in the hierarchy of creditors in the event of a default.

Debt/equity Ratio

A ratio used to determine how much of a company's assets are financed through equity versus debt.

Tax Shield

A deduction from taxable income that results in a reduction of taxes owed, often associated with interest expense, depreciation, or other deductions.