1.) Flexibility of the source of financing. ____ tends to require fewer specific

Question

1.) Flexibility of the source of financing. ____ tends to require fewer specific asset restrictions, while _____ tends to require fewer enterprise restrictions.

a.Leases; loans

b.Leases, leases

c.Loans; loans

d.Loans, leases

2.) _____ is not really buying on credit, whereas _____ is generally free financing for a specified period of time.

a.Cash on delivery, cash in advance.

b.Cash in advance; net 30

c.Net 30, cash in advance

d.Net 30; 1/15 net 40

3.) _____ is often used by manufacturers to significantly lower their production cost. It gives them the ability to produce in a level production mode year round, rather than running two or three shifts at the peak of their demand cycle.

a.Consignment

b.Net cash, bill to bill

c.Seasonal dating

d.Cash in advance

4.)A firm is offered credit terms of 1.5/10, net 40. What would be the cost to this firm of using its vendor as its banker?

a.18.53%

b.18.25%

c.13.90%

d.17.63%

Explanation / Answer

1. d.Loans, leases

2. b.Cash in advance; net 30

3. a.Consignment

4. d.17.63%

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