Asset-Based Financing

question 94

Multiple Choice

Asset-based financing:

• A)is efficient since the small business borrows only the money it needs.
• B)provides less borrowing capacity than inventory-based financing.
• C)is more expensive than other types of financing.
• D)is less desirable than inventory-only deals to bankers.

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Definitions:

Risk-Adjusted Discount Rate

A rate of return that accounts for the risk of an investment, used in capital budgeting to discount future cash flows to their present value.

Growth Rate

The rate at which a company's earnings or revenue increases over a specified period.

Chapter 7 Bankruptcy

A form of bankruptcy that involves the liquidation of a debtor's assets to pay off creditors, resulting in the discharge of remaining debts.

Chapter 11

The chapter of the bankruptcy code dealing with reorganization. Firms in bankruptcy proceedings are commonly said to be “in Chapter 11.”