Which of the Following Is True of Commitment Fees

question 19

Multiple Choice

Which of the following is true of commitment fees?

• A)Commitment fees are in the neighborhood of one quarter of 1% per year.
• B)Commitment fees are approximately three-fourth of 1% per year.
• C)Commitment fees are usually half of the risk-free rate.
• D)Commitment fees are in the neighborhood of the risk-free rate.

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Definitions:

Cash Over and Short

An account used to report the discrepancies between the physical cash on hand and the recorded amounts in the books.

Cash Sales

Transactions where payment is made by the customer at the time of purchase, involving immediate transfer of cash.

Accounts Receivable

Money owed to a company by its customers for products or services that have been delivered or used but not yet paid for.

Liquidity of Receivables

Indicates how quickly receivables can be turned into cash, reflecting a company's efficiency in managing credit it extends to customers.