An Operating Loan Is Useful for All of the Following

question 22

Multiple Choice

An operating loan is useful for all of the following, except:

• A) To cover your day-to-day expenses
• B) To purchase additional inventory in anticipation of your peak selling period
• C) To bridge unexpected cash flow interruptions and/or shortfalls
• D) For long-term, costly capital expenditures

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Definitions:

Net Present Value

A financial metric that calculates the present value of all cash flows associated with a project or investment, considering both inflows and outflows, to assess its profitability.

Monthly Interest Rate

The interest rate applied to a loan or debt on a monthly basis, often used for calculating monthly payments on a loan.

Carrying Cost

The total cost of holding inventory, including storage, insurance, taxes, and opportunity costs, but not limited to these.

Restocked Inventory

Inventory items that have been replenished or added to, typically after being sold or used up.