Vikram and Rupi decide to start a new restaurant. They obtain a loan from the bank, but the bank insists that they pledge the equipment owned by the restaurant as security for the repayment of the loan. Which of the following does this exemplify?
A) securitization
B) amortization
C) collateral
D) working capital

Question

Quizplus · Accepted Answer

Pledging equipment as security for a loan is an example of collateral, where an asset is pledged as security against the repayment of a loan. Securitization refers to the process of pooling and repackaging assets into securities, while amortization refers to the process of paying off a loan in regular instalments over a period of time. Working capital refers to the funds used to cover a company's day-to-day operating expenses.

Vikram and Rupi Decide to Start a New Restaurant