Asked by Julianna Velaj on Apr 29, 2024
Verified
Which of the following is the best definition of operating loan?
A) A written statement by a bank that money will be paid, provided conditions specified in the letter are met.
B) Short-term financing in which the factor purchases all of a firm's receivables and forwards the proceeds to the seller as soon as they are collected.
C) The time period between the acquisition of inventory and when cash is collected from receivables.
D) Loan negotiated with banks for day-to-day operations.
E) Costs that fall with increases in the level of investment in current assets.
Receivables
Receivables are amounts owed to a business by its customers for goods or services delivered on credit, considered a current asset on the balance sheet.
Day-to-Day Operations
The routine activities that are necessary for a business or organization to function efficiently on a daily basis.
- Understand different short-term financing options available to businesses and their characteristics.
Verified Answer
CM
Connor McGeeMay 06, 2024
Final Answer :
D
Explanation :
An operating loan is specifically designed to support the day-to-day operations of a business. This includes covering short-term needs such as payroll, inventory purchases, and other operational expenses.
Learning Objectives
- Understand different short-term financing options available to businesses and their characteristics.