CFA Practice Question

There are 120 practice questions for this study session.

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 ______

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

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

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.
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