Anthony Newton Wants to Buy a New Sail Boat

question 100

Multiple Choice

Anthony Newton wants to buy a new sail boat.He is planning on making a $10,000 cash down payment,which is a large portion of the cost of what he is financing.In which way is Anthony reducing his lender's risk?

• A)He is sharing the interest rate risk with his lender.
• B)He is pledging valuable assets that can be seized if the loan is not repaid.
• C)He is taking a higher stake in the asset he is purchasing.
• D)He is repaying the loan over a faster period of time.
• E)None of these.

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Definitions:

LIFO Retail Inventory Method

An inventory costing method that assumes the last items placed in inventory are sold first, not necessarily reflecting the actual physical flow of merchandise.

Ending Inventory

The value of goods available for sale at the end of an accounting period, calculated as the beginning inventory plus purchases minus cost of goods sold.

Net Markups

The difference between the cost of a good or service and its selling price, after accounting for discounts, allowances, or returns.

Net Markdowns

The reduction in the original selling price of merchandise minus any markdown cancellations.