Timber Woods Inc. has just arranged a $300,000 line of credit with its banker for the next year. Which of the following statements is true of this scenario?
A) Timber Woods now has $300,000 more in cash in its bank account, but it must begin paying financing charges on these funds immediately.
B) Timber Woods now has guaranteed access to up to $300,000, but it must pay a commitment fee on any unused portion of these available funds.
C) Timber Woods can take loans of up to $300,000 from the bank over the next year as long as its credit rating doesn't deteriorate and the bank has sufficient funds.
D) The bank now holds commercial papers issued by Timber Woods that will be worth $300,000 plus interest when it matures.

Question

Quizplus · Accepted Answer

A line of credit allows Timber Woods to borrow up to $300,000 as needed, provided their creditworthiness remains stable and the bank has the funds available.