Before requesting a loan, it is important to:

Consult with a financial advisor exclusively.

Immediately fill out a loan application.

Only compile a list of references.

When applying for a loan, what should you provide along with the loan application?

Documents such as proof of income, identification, credit history, and any other relevant financial information requested by the lender.

What does a debit card do when a purchase is made?

Electronically subtracts the amount of a purchase from a customer's bank account

Adds the amount of a purchase to a customer's bank account

Transfers the amount of a purchase to a mobile payment app

Automatically deposits the amount of a purchase into a seller's account

What is a mobile payment?

A payment for a product or service which is made using an electronic device or an app

A physical card used to withdraw cash from ATMs

A type of electronic funds transfer system

A service provided exclusively by banks

Which of the following is an example of an Electronic Funds Transfer (EFT) system?

Automated clearinghouses (ACHs)

Why is short-term debt financing usually easier to obtain than long-term debt financing?

Short-term loans have a shorter repayment period, which means less risk of nonpayment.

The interest rates for short-term loans are significantly higher.

Short-term loans are only available to large corporations.

Long-term loans are not available to new businesses.

What is a characteristic of the dollar amounts of short-term loans compared to those of long-term loans?

They are determined by the stock market.

Which of the following is true about the relationship between the short-term borrower and the lender?

A close working relationship normally exists.

A close working relationship is unusual and not necessary.

The relationship is strictly online and impersonal.

The relationship is governed by international laws.

What is the prime interest rate?

The lowest rate charged by a bank for a short-term loan

The highest rate charged by a bank for a short-term loan

The rate charged by a bank for a long-term loan

The rate a corporation pays when it sells commercial paper

What might a bank require from a commercial borrower regarding short-term loans?

To keep a compensating balance on deposit and clean up its short-term loans at least once a year

To use short-term borrowing continuously without paying off

To pay the highest interest rate for short-term loans

To issue commercial paper for the loan

What is commercial paper?

A short-term promissory note issued by a large corporation

A long-term promissory note issued by a small corporation

A document that outlines the terms of a bank loan

A financial statement issued by a corporation

What determines the interest rate a corporation pays when it sells commercial paper?

The corporation's credit rating and its ability to repay the commercial paper

The corporation's size and number of employees

The prime interest rate at the time of sale

The length of time the corporation has been in business

What is a factor in the context of short-term debt financing?

A firm that specializes in buying other firms' accounts receivable

A bank that provides loans to companies

A type of insurance company that guarantees loan repayments

A government agency that oversees financial transactions

What is one of the benefits for a firm selling its accounts receivable to a factoring company?

It receives more than the face value of the accounts receivable

It extends the period for collecting the debt

It increases the risk of nonpayment

Which of the following is considered the least expensive short-term financing method?

Factoring of accounts receivable

Which methods are typically the highest-cost methods of short-term financing?

Secured loans and factoring of accounts receivable

Trade credit and unsecured loans

Unsecured loans and factoring of accounts receivable

Chapter 16- Part 3 Quiz

Authored by Thomas Hillebrands

Computers

9th Grade

Used 1+ times

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30 questions

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MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What is the purpose of savings and checking accounts according to the text?

To provide loans to businesses

To provide a safe place to store money a business doesn’t immediately need

To invest in stocks and bonds

To pay employees and other operational costs

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What is a Certificate of Deposit (CD)?

A loan provided by the bank to a business

A document stating that the bank will pay the depositor a guaranteed interest rate on money left on deposit for a specified period of time

A credit card issued by the bank

A type of insurance policy for businesses

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Why might a business choose to deposit money in a checking account?

To earn a high rate of interest on excess cash

To secure a loan from the bank

To write checks to pay for purchases

To invest in the bank's financial products

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What is a short-term business loan?

A loan that must be repaid over a period of years

A loan that is approved after the money is needed

A loan that must be repaid within one year or less

A loan that requires real estate as security

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What is a line of credit?

A loan that requires collateral

A loan that is approved before the money is actually needed

A guaranteed line of credit

A loan that must be repaid within two years

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What is a revolving credit agreement?

A loan that must be repaid within one year or less

A loan that is approved after the money is needed

A guaranteed line of credit

A loan that requires real estate as security

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What is typically required as collateral for long-term business loans?

A personal guarantee

A short-term business loan

Real estate or property pledged as security for a loan

A revolving credit agreement

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Chapter 16- Part 3 Quiz

What is the purpose of savings and checking accounts according to the text?

What is a Certificate of Deposit (CD)?

Why might a business choose to deposit money in a checking account?

What is a short-term business loan?

What is a line of credit?

What is a revolving credit agreement?

What is typically required as collateral for long-term business loans?

Before requesting a loan, it is important to:

When applying for a loan, what should you provide along with the loan application?

According to Table 16-2, which payment option is preferred by the highest percentage of people?

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