Chapter 8 Short-Term Financing

net credit position can be determined by computing the ___

• total current asset plus total current liabilities

• difference between account receivable and account payable

• sum of account payable and trade credit

• total current liabilities

_________ is a minimum average account balance maintained as an alternative to fee charged by a bank for services rendered.

• interest rate

• compensating balance

• trade credit

• credit card

You need RM50,000 for new project. You plan to borrow from a bank which offer loan with a compensating balance of 20%. The amount to borrowed from the bank is RM _____

when choosing the best financing sources, a potential borrower will typically make decision based on ____ (you can choose more than one answers for this question, if any)

• the number of applicants

• effective interest rate

• number of bank branches

• compensating balance

series of equal payments over the life of a loan is called _____

• annuity income

• installment

• deposit

• loan disbursement

credit conditions can change dramatically due to the following, EXCEPT

• unexpected defaults

• economic recessions

• changes in monetary policy

• ethical standards

the effective interest rate on a loan is based on the following items, EXCEPT

• loan amount

• principal on previous loan

• method of repayment

• duration of a loan

____ means an equal dollar amount is paid each period to pay off principal and interest.

• depreciation

• interest

• tax

• amortization

Commercial paper represents a short-term, unsecured promissory note issued to the public.

• true

• false

Eurodollar loan is ____

• a loan denominated in Ringgit and made by foreign bank holding Ringgit deposits.

• a short-term loan made by foreign borrower.

• a cheaper way of financing as compared to domestic loan.

• a loan made by subsidiary company.