- CFA Exams
- CFA Exam: Level I 2021
- Study Session 11. Corporate Finance (2)
- Reading 35. Working Capital Management
- Subject 5. Managing Short-Term Financing
CFA Practice Question
A firm wishes to obtain short-term financing at a rate significantly below that which a bank would normally charge. If the firm is large and highly rated, it may be able to meet its needs by ______
B. obtaining an unsecured non-committed bank line of credit.
C. factoring its receivables.
D. obtaining a bank loan secured by its inventory.
E. issuing commercial paper.
A. obtaining an unsecured committed bank line of credit.
B. obtaining an unsecured non-committed bank line of credit.
C. factoring its receivables.
D. obtaining a bank loan secured by its inventory.
E. issuing commercial paper.
Correct Answer: E
C: Factoring is a relatively expensive source of short-term financing.
A/B/D: Since this loan is obtained from a bank, the rate will not be significantly below that which a bank would normally charge.
C: Factoring is a relatively expensive source of short-term financing.
User Contributed Comments 3
| User | Comment |
|---|---|
| johntan1979 | I got this right via elimination technique: 1. Anything to do with banks are out, meaning A, B, D are out. 2. Factoring sounds like multiplying... so should be more expensive :p |
| johntan1979 | AND from the notes, factoring yet again has something to do with banks... so... out. |
| schweitzdm | johntan1979 I wish there was a way I could upvote your comments! Always great. |