A Wholly Owned Subsidiary Whose Primary Purpose Is to Finance

question 18

Multiple Choice

A wholly owned subsidiary whose primary purpose is to finance sales of the parent company's products and services, provide wholesale financing to distributors of the parent company's products, and purchase receivables of the parent company is a

• A)captive finance subsidiary.
• B)factor.
• C)leasing agent.
• D)captive factoring agent.

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Definitions:

Interest Expense

The cost incurred by an entity for borrowed funds, which can include costs related to bonds, loans, and lines of credit.

Inventory Turnover Ratio

A financial metric indicating how many times a company's inventory is sold and replaced over a specific period.

Return on Equity

A measure of financial performance calculated by dividing net income by shareholders' equity, indicating how well a company uses investments to generate earnings growth.

Retained Earnings

The portion of a company's profits that is kept or retained rather than paid out as dividends to shareholders.