1. If the conditions for a line of credit require a your firm must pay the line

Question

1. If the conditions for a line of credit require a your firm must pay the line down A) B) C) D) E) to zero once each year and maintain a zero balance for 45 to 60 days. payoff period no-loan period cleanup clause zero balance period interest-free period Your firm has a bank loan with terms containing a- maintain an average daily balance of $90.000 in a non-interest-bearing account. collateral requirement line-of-credit security arrangement compensating balance requirement commitment requirement zero balance agreement 2. -which specifies you must A) B) C) D) E) 3. Your firm has an inventory period of 45 days, an accounts payable period of 22 days and an accounts receivable period (ACP) of 28 days. The CFO wants to implement a discount plan in order to reduce the receivables period to 18 days. What will happen to your company's operating cycle? A) It will fall from 73 days to 63 days. B) It will fall from 51 days to 41 days. C) It will be unaffected by the change in policy It wil ll rise from 45 days to 55 days. D) E) It will rise from 73 days to 83 days.

Explanation / Answer

1)

Option C

Cleanup clause

2)

Option C

Compensating balance requirement

3)

Option B

CFO = 45 + 28 - 22 = 51

CFO = 45 + 18 - 22 = 41

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