BUS 402 WK 8 Quiz 8 Chapter 15,16
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1) Sometimes small businesses have to use debt financing instead of equity financing. When they do, they discover that:
A) banks give them a lower interest rate because of their closeness to the customer and better management practices.
B) finance companies are their primary source for debt funding.
C) the cost of debt financing is often less than the cost of equity financing.
D) there are fewer lenders than investors in the marketplace, but the money is easier to get from lenders.
2) For small businesses, ________ are the heart of the financial market.
B) finance companies
C) private placement
D) insurance companies
3) As the providers of debt financing to small businesses, banks tend to:
A) make only asset-based, long-term loans.
B) be very conservative and lend primarily short-term capital.
C) focus on either inventory or accounts receivable when evaluating a business's loan requests.
D) be eager lenders to start-ups as these tend to be smaller loans at less risk.
4) The most common type of commercial bank loan granted to small businesses is:
A) the short-term commercial loan.
B) the lines of credit agreement.
C) the floor plan.
D) the unsecured term loan.
5) A ________ is an agreement with a bank that allows a small business to borrow up to a predetermined specified amount during the year without making an application each time.
A) term loan
C) line of credit
D) floor plan
6) Sunny Bright's The Tanning Parlor is in the middle of its busy season. The hiring of extra help, some unexpected repairs on equipment, etc., has led to a shortage of operating capital. What type of financing would Sunny most likely use in this situation?
A) Line of credit
B) Floor planning