Tidewater Distributors has an arrangement with its bank in which it has access to a fixed amount of funds to use as needed, and the company has to make monthly payments along with interest based on the outstanding amount of the loan. What type of financing does Tidewater Distributors use?
A) commercial paper
B) line of credit
C) factoring
D) trade credit

Question

Quizplus · Accepted Answer

Tidewater Distributors is utilizing a line of credit, which provides them with access to a fixed amount of funds and requires them to make monthly payments along with interest based on the outstanding balance of the loan. Commercial paper, factoring, and trade credit are all different methods of financing and do not fit the description provided in the question.

Tidewater Distributors Has an Arrangement with Its Bank in Which