A Line of Credit Can Be Either a Formal or an Informal

question 24

True/False

A line of credit can be either a formal or an informal agreement between a borrower and a bank regarding the maximum amount of credit the bank will extend to the borrower during some future period, assuming the borrower maintains its financial strength.

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Definitions:

Long-Run Equilibrium

A state in which all firms in a market or industry are making normal profits, with no incentives for entry or exit, and all factors of production are perfectly mobile.

Economic Profits

The difference between the total revenue generated by a business and the total costs, including both explicit and implicit costs.

Industry Exit

The process by which firms leave a market or sector, often due to economic pressures or declining profitability.

Economic Profit

calculated as the difference between a firm's total revenue and its total costs, recognizing both explicit and implicit costs, emphasizes a firm's real financial health.