Chapter 11

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Identify a true statement about debit financing.

It is also termed asset-financing

_____ are a specific type of inventory loan that is utilized to finance floor plans of retailers, such as automobile and appliance dealers.

Mortgage receipts

Identify a feature of inventory loans.

Inventory can usually act as the basis of a loan, when the inventory is more liquid and can be easily sold.

Which of the following are categories of equipment financing? (3)

-Sale-leaseback financing -Financing used equipment already owned by the company -Financing the purchasing of the new equipment

Which of the following are conventional bank loans? (3)

-Straight commercial loans -Lines of credit -Character loans

Which of the following bases are evaluated for alternative sources of external funding? (3)

-The length of time the funds are available -The amount of the company control last -The costs involved

Which of the following are key factors involved in factoring the use of the one type of financing over another? (3)

-The prevailing interest rates -The availability of funds -Assets of venture

Identifying a feature of accounts receivable loans used by entrepreneurs.

Accounts receivable act as a good basis for a loan, especially if the customer base is recognized and credit worthy.

Unlike short-term debts, long term debts _____.

Are dependent on the requirement of a collateral.

The financing method that involves an interest bearing instrument, usually a loan, the payment of which is not directly related to the sales and profits of the venture is referred to as _____.

Debt Financing

Commercial banks provide funds in the form of _____.

Debt financing

Obtaining funds for a company in exchange for ownership is referred to as _____.

Equity financing

Identify a true statement about family and friends who act as investors for entrepreneurs

They are most likely to invest because of their relationship with the entrepreneur

______ is referred to as leveraging the firm.

Using debt as a financing instrument


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