QUESTION: 101

The treasurer of a corporation is negotiating with one of his/her suppliers to allow the corporation to have 30 days to pay the supplier’s invoices. The treasurer is arranging:

short-term financing.
revolving credit agreement.
factoring of receivables.
uncommitted line of credit.

Answer(s): A

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QUESTION: 102

A company is looking for a way to finance their inventory. What is the BEST funding match?

Long-term private placement
Short-term debt
Equity issuance
Stock split

Answer(s): B

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A company has negotiated a credit facility with the following terms:

• $5,000,000 line of credit
• $3,000,000 average borrowing
• 30 basis point commitment fee on the unused portion of the line
• Interest rate on advances is 1-month LIBOR plus 4%
• 1-month LIBOR is currently 2%

What is the annual interest rate on the line of credit?

6.0%
6.2%
9.0%
9.3%

Answer(s): B

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QUESTION: 104

A company has negotiated a credit facility with the following terms:

• $5,000,000 line of credit
• $3,000,000 average borrowing
• 30 basis point commitment fee on unused portion of line
• Interest rate on advances is 1-month LIBOR plus 4%
• 1-month LIBOR is currently 2%
• Compensating balance requirement of 20% on the outstanding borrowings

What is the effective annual borrowing rate for the line of credit?

6.0%
6.2%
7.8%
9.3%

Answer(s): C

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QUESTION: 101

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QUESTION: 104

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