To Ensure an Unsecured Line of Credit Is Used Solely

question 39

Multiple Choice

To ensure an unsecured line of credit is used solely for short-term purposes, the loan arrangement frequently includes which one of the following?

• A)Cleanup period
• B)Grace period
• C)Revolver
• D)Factoring arrangement
• E)Lien on the borrower's inventory

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Definitions:

Cash Flow

The complete sum of funds moving in and out of a corporation, impacting its ability to meet short-term obligations.

Du Pont Equations

A series of relationships between financial ratios that illustrates the inner workings of businesses and how performance in one area influences performance in others.

Proceeds

The total amount of money received from a sale or transaction.

Depreciation Expense

The allocation of the cost of a tangible asset over its useful life.