What Is the Risk in Using a Bank Overdraft as a Source

question 33

Multiple Choice

What is the risk in using a bank overdraft as a source of financing?

• A) The company's indebtedness will grow beyond its ability to handle it.
• B) Its cost exceeds that of the company's weighted average cost of capital.
• C) It will negatively impact the credit rating of the company.
• D) Interest costs cannot be deducted from income taxes.
• E) It may have to be paid in full with little prior notice.

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Definitions:

Prokaryotes

Microorganisms characterized by the absence of a nucleus and other membrane-bound organelles, broadly classified into bacteria and archaea.

Eukaryotes

Organisms with cells that contain a nucleus enclosed within membranes.

DNA Pol III

An enzyme involved in DNA replication, responsible for synthesizing new strands of DNA in bacteria.

Polynucleotide Chain

A biopolymer composed of 13 or more nucleotide monomers covalently bonded in a sequence, forming part of the structure of DNA and RNA.