Explain How Revolving Loans Work and How They Are Beneficial

question 41

Essay

Explain how revolving loans work and how they are beneficial to firms who are trying to minimize their cost of borrowing and manage their short-term financing so that they do not become illiquid.

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Definitions:

Pure Reactive Load

An electrical load that consumes reactive power only, with a power factor of zero, meaning it does not dissipate real power.

Three-Phase Load

An electrical load operating with three phases of alternating current, providing more consistent, balanced power delivery.

VARs

Volt-Ampere Reactive, a unit of reactive power in an AC electrical power system.

Three-Phase Connection

A method of electrical connection that uses three alternating currents of the same frequency and amplitude but with phases offset by one third of a cycle.