Loans to purchase inventory are considered self-liquidating because ____.
A)these types of loans have little risk
B)these loans are paid according to a set schedule
C)these loans are paid as soon as the inventory is sold
D)these loans have claims against the firm in general and not to a specific asset

Question

Quizplus · Accepted Answer

Loans to purchase inventory are considered self-liquidating because they are paid off as soon as the inventory is sold. This means that the inventory itself is used to generate the revenue needed to pay off the loan, making it a low-risk type of financing.

Loans to Purchase Inventory Are Considered Self-Liquidating Because ____