A firm negotiates a(n) ________ with its bank. This arrangement gives the firm access to a specified amount of unsecured short-term funds, provided the bank has the funds available.

Question

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A line of credit is an agreement between a firm and its bank that provides the firm with access to a specified amount of unsecured short-term funds, provided the bank has the funds available. This allows the firm to borrow funds as needed, up to the limit of the credit line, without having to go through the process of applying for a new loan each time. The other options listed are not typical agreements between firms and banks for short-term funding.

A Firm Negotiates A(n) ________ with Its Bank