High Point Hotel (HPH) has $165,000 in accounts receivable. To finance a major purchase, the company assigns these receivables to Cross Town Bank

A cumulative cash deficit indicates a firm:    A.  has at least a short-term need for external funding. B.  is facing long-term financial distress. C.  will go out of business within the year. D.  is capable of funding all of its needs internally. E.  is using its cash wisely. Refer to section 18.4

53.	The most common means of financing a temporary cash deficit is a:    A.  long-term secured bank loan. B.  short-term secured bank loan. C.  short-term issue of corporate bonds. D.  long-term unsecured bank loan. E.  short-term unsecured bank loan. Refer to section 18.5

54.

The primary difference between a line of credit and a revolving credit arrangement is the:    A.  type of collateral used to secure the loan. B.  length of the credit period. C.  fact that the line of credit is a secured loan and the revolving credit arrangement is unsecured. D.  fact that the line of credit is an unsecured loan and the revolving credit arrangement is secured. E.  classification as either a committed or a noncommitted loan. Refer to section 18.5

55.

A compensating balance: I. is required when a firm acquires any bank financing other than a line of credit. II. increases the cost of short-term bank financing. III. may be required even if a firm never borrows funds. IV. is often used as a means of paying for banking services received.    A.  I and III only B.  II and IV only C.  II and III only D.  I and IV only E.  II, III, and IV only Refer to section 18.5

56.

High Point Hotel (HPH) has $165,000 in accounts receivable. To finance a major purchase, the company assigns these receivables to Cross Town Bank. Which one of the following statements correctly describes this transaction?    A.  HPH will immediately receive $165,000 and will have no further obligation related to these receivables. B.  HPH will receive some amount of cash immediately while maintaining full responsibility for any uncollected receivables. C.  Cross Town Bank accepts full responsibility for the collection of the accounts receivables and, in exchange, immediately pays HPH a discounted value for its receivables. D.  Cross Town Bank accepts full responsibility for collecting the accounts receivables and pays HPH a discounted price for the accounts collected after the normal collection period has elapsed. E.  HPH receives the full amount of its receivables upon assignment but must reimburse Cross Town Bank for any uncollected account. Refer to section 18.5

AACSB: Analytic