Assume the Following Facts About a Firm That Borrows by Pledging

question 156

Multiple Choice

Assume the following facts about a firm that borrows by pledging its receivables $\begin{array}{ll}\text { Average balance of accounts receivable }&\$50,000\\\text { Annual receivables turnover ( } 360 / \mathrm{ACP}) & 6 \mathrm{x} \\\text { Administrative fee charged on all new receivabless } & 1\% \\\text { Interest rate on outstandingloans } & 12 \% \\\text { Percent of receivables accepted } & 75 \%\end{array}$ What is the effective cost of financing stated as an annual rate?

• A) 23.5%
• B) 20.0%
• C) 13.0%
• D) 16.8%

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Definitions:

Distal

Referring to a position farthest from the point of attachment or origin, usually used in the context of the limbs.

Lateral

Pertaining to the side of a structure or pointing away from the midline of the body or an organ.

Medial

Pertaining to the middle or center; closer to the median plane or midline of the body or structure.

Blood Cell Production

Blood cell production, also known as hematopoiesis, is the process by which the body produces blood cells in the bone marrow.