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When a Loan Is Secured by Receivables, the Firm Assigns

question 28

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When a loan is secured by receivables, the firm assigns the receivables to the bank. If the firm fails to repay the loan, the bank can collect the receivables from the firm's customers and use the cash to pay off the debt. The risk of default on the receivables is now borne by the bank.


Definitions:

Polypropylene

A thermoplastic polymer made through the polymerization of propylene, used in packaging, textiles, and various types of containers.

Carbonate Ester

An organic compound formed by the reaction of a carbonate ion with an alcohol, often used as solvents and intermediates in chemical synthesis.

Glass Transition Temperature

The temperature range over which a polymer changes from a hard, glassy state to a soft, rubbery state.

Polymer

A large molecule or macromolecule composed of many repeated subunits.

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