What Does It Mean for a New Business Loan to Be

question 117

Multiple Choice

What does it mean for a new business loan to be collateralized?

• A)Should the business fail, the loan is simply not repaid.
• B)The lender may sell a specific asset to recover the loan.
• C)The borrower does not pay interest on the loan.
• D)The borrower only pays interest when the entire loan is due.

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Definitions:

Accounting Equation

The fundamental equation of double-entry bookkeeping, stating that assets = liabilities + owners' equity.

Purchases Equipment

The process of acquiring physical assets like machinery or office supplies that are used in the operations of a business.

Liabilities Increase

Refers to a rise in the obligations or debts that a company owes, which may affect its financial health.

Net Income

The end profit of a company after revenue has been reduced by expenses and taxes.