Farmers Savings Co.agreed to extend Eckert's Orchards $200,000 of unsecured short-term funds,contingent upon the bank having the funds available.This arrangement represents a:
A)trade voucher.
B)pledge agreement.
C)line of credit.
D)factoring agreement.

Question

Quizplus · Accepted Answer

This arrangement represents a line of credit because it is a pre-approved amount of available funds that can be used as needed by the borrower for short-term financing, contingent upon the availability of funds in the bank. A trade voucher is a document used in a trade transaction as proof of payment, a pledge agreement is a form of collateral for a loan, and factoring is the sale of accounts receivable to a third party for immediate cash.