A ______ is an arrangement in which a bank agrees to permit a firm to borrow any amount up to a specified maximum during a designated time period.

Question

Quizplus · Accepted Answer

A line of credit is specifically designed to provide a company with access to cash when they need it, without having to continually apply for a new loan. It is a flexible funding arrangement that permits a company to borrow any amount up to a specified maximum during a designated period. Therefore, option A is the correct answer. B is incorrect because a commercial paper agreement refers to unsecured short-term debt that firms issue to raise funds quickly. Similarly, trade credit agreement refers to an agreement between a buyer and a seller where the buyer can purchase goods or services on credit terms from the seller. A promissory note is a legal document that contains a written promise from one party to pay another party a certain amount of money at a given date, while a factoring arrangement involves a company selling its accounts receivable to a third party at a discount to get cash quickly.

A ______ Is an Arrangement in Which a Bank Agrees