The Primary Difference Between a Line of Credit and a Revolving

question 45

Multiple Choice

The primary difference between a line of credit and a revolving credit arrangement is the:

• A)type of collateral used to secure the loan.
• B)length of the credit period.
• C)fact that the line of credit is a secured loan and the revolving credit arrangement is unsecured.
• D)fact that the line of credit is an unsecured loan and the revolving credit arrangement is secured.
• E)classification as either a committed or a noncommitted loan.

---

Definitions:

Extraordinary Gain

A gain resulting from events or transactions that are both unusual in nature and infrequent in occurrence, separated from regular business operations.

Fair Market Value

The price at which an asset would sell in the market under conditions where buyers and sellers are acting freely, informed, and without undue pressure.

Book Value

The net value of a company's assets as listed on the balance sheet, calculated as total assets minus intangible assets (like goodwill) and liabilities.

Interest Rate

The percentage at which interest is paid by a borrower for the use of money that they borrow from a lender.