When a Small Business Is Refused a Loan Because It

question 107

Multiple Choice

When a small business is refused a loan because it is not profitable and deemed a poor credit risk,the owner can usually turn to ________ as a source of short-term funds.

• A)venture capital companies
• B)trade credit
• C)stockbrokers
• D)loans from insurance companies

---

Definitions:

Interest Expense

The cost incurred by an entity for borrowed funds, which is recognized in the financial statements as an expense.

Times Interest Earned Ratio

A financial metric that measures a company's ability to cover its interest expenses with its earnings before interest and taxes.

Net Income

The total profit of a company after all expenses, including taxes and operating costs, have been deducted from total revenue.

Equity Multiplier

A financial leverage ratio that measures the portion of a company’s assets that is financed by stockholders' equity.