Identify key characteristics of short term financing options for a business.

Identify key characteristics of short term financing options for a business.

Which of the following statements accurately describes short term financing options?

•             a.)The amount a business needs to borrow is small compared to a long term loan.

•             b.)Short term financing would require a business to pay the money back in up to five years.

•             c.)The short term financing options are more difficult to obtain than long term options.

•             d.)The short repayment period is less risky for a business as the borrower.

2 — Secured Short Term Financing

Determine types of secured short term financing.

Which of the following items use collateral to obtain short term financing?

•             a.)Factoring accounts receivable and Loan secured by inventory

•             b.)Trade credit and Loan secured by inventory

•             c.)Line of credit and Factoring accounts receivable

•             d.)Trade credit and Line of credit

3 — Debt Financing

Recognize options for long term debt financing.

Which of the following describes a bond?

•             a.)A specific period when the payout will occur for a bond

•             b.)A group that represents the owners of a bond

•             c.)A process for taking on a loan and agreeing to pay back the borrowed funds

•             d.)An instrument that pays the buyer a set amount plus interest at the end of a defined term

4 — Equity Financing

Identify how companies can use equity for financing.

What does a company keep from making a profit, rather than sharing it with its stockholders?

•             a.)Dividends

•             b.)Capital gains

•             c.)Earnings per share

•             d.)Retained earnings

5 — Investors and Private Placement

Differentiate between the alternate forms of financing.

Compared to a venture capitalist, an angel investor is ____________.

•             a.)interested in managing business functions

•             b.)usually a group of people

•             c.)unwilling to take risk

•             d.)willing to provide initial funding