Gemstone Jewelers Obtains Needed Short-Term Funds by Selling Its Accounts

question 231

Multiple Choice

Gemstone Jewelers obtains needed short-term funds by selling its accounts receivable to the Friendly Finance Company. Friendly Finance usually pays Gemstone about 80% of the value of the receivables. Gemstone Jewelers utilizes ________ as a means of raising short-term funds.

• A) trade credit
• B) revolving credit agreements
• C) factoring
• D) receivable draft agreements

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Definitions:

Price/earnings Ratio

The Price/Earnings Ratio (P/E Ratio) is a valuation metric that compares the current share price of a company to its per-share earnings, used by investors to evaluate the investment attractiveness of a company.

Excess Cash

Refers to the amount of cash a company holds that is beyond what it requires for day-to-day operations and investments.

Dividend

The distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders. Dividends can be issued as cash payments, as shares of stock, or other property.

Share Repurchase

A company's buyback of its own shares from the marketplace, reducing the number of outstanding shares and potentially increasing share value.