Banks typically limit a company's line of credit to:
A)$10,000.
B)50 percent of the value of its inventory.
C)40 to 50 percent of its present working capital.
D)80 percent of its net worth.

Question

Quizplus · Accepted Answer

Banks typically limit a company's line of credit to 40 to 50 percent of its present working capital. This is because the bank wants to ensure that the company can repay the loan, and it is based on the company's ability to generate cash in the short term. The other options listed are not typical limits for a line of credit.

Banks Typically Limit a Company's Line of Credit To