Financial Decisions Quiz

When should a firm choose to avail of a cash discount offered by a supplier?

• When the borrowing rate is greater than the cost of the discount

• When the borrowing rate is less than the cost of the discount

• When the cost of the discount is not a factor

• When the borrowing rate is equal to the cost of the discount

If the borrowing rate is greater than the cost of the cash discount, what should a firm do to make a better financial decision?

• Avail of the cash discount

• Avoid taking the cash discount

• Consider other unrelated financial factors

• Seek legal advice for such decision

ABC Company is considering a supplier's discount with terms of 3/15, n/30. At the time the discount is offered, the market borrowing rate is 10% per annum. Should ABC Company avail of the discount?

• Yes, ABC Company should avail of the discount.

• No, ABC Company should not avail of the discount.

• It depends on other financial factors.

• ABC Company should consult its legal department.

XYZ Corporation is evaluating a cash discount opportunity with terms of 2/10, n/45. The current market borrowing rate is 23% per annum. Should XYZ Corporation take advantage of the discount?

• Yes, XYZ Corporation should take advantage of the discount.

• No, XYZ Corporation should not take advantage of the discount.

• It depends on other financial factors.

• XYZ Corporation should consult its tax advisor

You need a one-year loan of P30,000 at 10% interest. Banko de Aura offers the entire amount upfront for P30,000 to claim today, while Bank De Lana offers P27,000 to claim today and will collect the interest in advance. Which bank offers the cheaper credit?

• Banko De Lana

• Bank De Aura

• Both banks offer the same credit cost.

• It depends on your preferences and needs.

Why is understanding opportunity cost important when making financial decisions?

• It enables you to make informed choices about the trade-offs between using credit and savings

• It helps you build a better credit history

• It allows you to save more money for emergencies

• It minimizes the impact of inflation on your purchasing power

Which form of credit typically involves requiring the customer to provide additional assets or collateral to secure the loan?

• Secured charge account

• Unsecured personal loan

• Credit card

• Mortgage loan

What is a key feature that distinguishes a charge account from other credit forms?

• Low interest rates

• Multiple payment options

• Credit granted based on the customer's signature

• No credit limit

In an installment account, how is the repayment typically structured?

• The borrower must repay the entire principal amount in a single payment.

• The borrower can choose to make payments whenever they want.

• Payments are made in regular installments, often monthly.

• There is no need for repayment in an installment account.

What characterizes a straight loan in the context of credit?

• Borrower makes regular monthly payments.

• Lump sum repayment at the end of the loan term.

• The interest rate is fixed for the entire loan term.

• Credit is granted based on collateral provided