Asked by Lizbeth RamosPerdomo on Jun 25, 2024
Verified
Maria wants to start a restaurant of her own.As she does not have any savings,she approaches her bank for money and enters an agreement with the bank.According to the agreement,the bank agrees to lend her $5000 upon request provided it has sufficient funds to loan the amount.In this scenario,the type of funding obtained by Maria can be regarded as a _____.
A) line of credit
B) trade credit
C) logbook loan
D) non-recourse loan
E) personal loan
Line of Credit
An arrangement by which a bank agrees to lend a specified amount of money to an organization upon request.
Non-recourse Loan
A type of loan where the lender's ability to recoup losses is limited to seizing the collateral, with no right to pursue the borrower's other assets if the collateral’s value is insufficient.
- Discover the range of short-term financing methods and know their applications and related costs.
Verified Answer
OL
Othniel londonJun 26, 2024
Final Answer :
A
Explanation :
A line of credit is a flexible loan from a bank or financial institution. Similar to a credit card that offers you a limited amount of funds—funds that you can use when, if, and how you wish—a line of credit is a defined amount of money that you can access as needed and then repay immediately or over a prespecified period of time. In Maria's case, the bank agrees to lend her up to $5000 upon request, which is exactly how a line of credit works.
Learning Objectives
- Discover the range of short-term financing methods and know their applications and related costs.
Related questions
A Finance Company That Buys Other Companies' Accounts Receivable for ...
If a Company Decides to Factor Its Receivables Without Recourse ...
Which of the Following Is True Regarding Pledged Receivables ...
In the Context of Working Capital an Accrual Is Not ...
Which of the Following Is a Source of Short-Term Financing ...