Ralph owns a lumber yard and has a $500,000 purchase order from a construction company. His cost of goods sold for this order is $300,000. Because his company needs working capital, the most logical loan for the lumber yard would be to use

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Purchase-order financing is the most logical loan for Ralph's lumber yard because it provides the necessary funds to fulfill the purchase order and allows the company to maintain its working capital. Unlike an equipment-based loan or asset-based financing, purchase-order financing is specifically designed to provide funds for fulfilling purchase orders. Factoring involves selling accounts receivable to a third party, which would not be necessary in this scenario as the purchase order has not yet been fulfilled.

Ralph Owns a Lumber Yard and Has a $500,000 Purchase