If a firm has set up a revolving credit agreement with a bank, the risk to the firm of being unable to obtain funds when needed is lower than if it had an informal line of credit.

Question

Quizplus · Accepted Answer

A revolving credit agreement with a bank provides a formal agreement and commitment to provide funds when needed, which reduces the risk of a firm being unable to obtain funds. An informal line of credit may not offer this level of guarantee, increasing the risk to the firm.

If a Firm Has Set Up a Revolving Credit Agreement