A Commitment Fee Is

question 126

Multiple Choice

A commitment fee is

• A) an amount paid on the unused portion of a loan in a private placement.
• B) an amount paid by an investment banker to ensure the sale of securities.
• C) paid by investors to guarantee that a company will borrow from them.
• D) paid by bondholders to secure the right to convert bonds into common stock.

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Definitions:

Current Ratio

A ratio indicating how well a company can cover its short-term dues.

Receivable Turnover Ratio

A financial metric that measures how efficiently a company collects cash from its credit sales by comparing net credit sales with the average accounts receivable.

Cash Dividend

A payment made in cash to shareholders that is derived from a company's profits or reserves.

Times Interest Earned Ratio

A financial metric assessing a company’s ability to meet its interest obligations from its operating income.