In a General Line of Credit

question 4

Multiple Choice

In a general line of credit:

• A) the bank does not charge a commitment fee.
• B) the bank charges a commitment fee on the total amount.
• C) the bank charges a commitment fee on the used balance.
• D) the bank charges a commitment fee on the unused balance.
• E) the commitment fee charged is the same as that in a revolving credit agreement.

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Definitions:

Pre-tax Interim Net Income

The net income earned before taxes are deducted during an interim period, such as a quarter or half-year.

Income Tax Loss

A situation where tax-deductible expenses exceed taxable revenues, potentially reducing taxable income in future periods through loss carryforwards.

Tax Loss Carryforward

A tax provision that allows a company to use its current loss towards future profits to reduce taxable income.

Taxable Income

The amount of income subject to taxation, after all deductions and allowances have been considered, according to the tax laws.