A written,legally binding agreement that obligates the bank to lend a firm any amount up to a stated maximum,regardless of the financial condition of the firm (unless the firm is bankrupt)as long as the firm satisfies any restrictions in the agreement is called:
A)a bridge loan.
B)a single,end-of-period-payment loan.
C)a short-term mortgage loan.
D)a committed line of credit.

Question

Quizplus · Accepted Answer

A committed line of credit is a written, legally binding agreement between a bank and a firm that obligates the bank to lend the firm any amount up to a stated maximum regardless of the financial condition of the firm, as long as the firm satisfies any restrictions in the agreement. This means that the firm can access the funds when needed, providing stability and flexibility to the firm's cash flow management.

A Written,legally Binding Agreement That Obligates the Bank to Lend