Which of the Following Statements Is False

question 12

Multiple Choice

Which of the following statements is false?

• A) Commercial banks, finance companies, and factors, which are firms that purchase the receivables of other companies, are the most common sources for secured short-term loans.
• B) The factoring arrangement may be without recourse, in which case the lender bears the risk of bad-debt losses.
• C) In a floating lien, general lien, or blanket lien arrangement, specific inventory is used to secure the loan.
• D) If a firm sells its goods on terms of net 30, then the factor will pay the firm the face value of its receivables, less a factor's fee, at the end of 30 days.

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Definitions:

Long-Term Liabilities

All of the entity’s obligations that are not classified as current liabilities.

Balance Sheet

A financial statement that summarizes a company's assets, liabilities, and shareholders' equity at a specific point in time, providing a snapshot of its financial condition.

Future Cash Flows

Estimates of the amounts of cash that a company expects to receive or pay out in the future, important for budgeting, forecasting, and valuation.

Interest-Bearing Note

A debt instrument that pays interest to the holder at a fixed or variable interest rate until the principal amount is repaid.