Question

The financial manager of Carolina Graphics negotiated a ________ with her bank that allows Carolina to borrow up to $50,000 without collateral. This arrangement eliminates the need to renegotiate the terms of the loan and complete new paperwork each time Carolina borrows money. The preapproved short-term loan agreement is contingent upon the bank having the funds available.

A. line of credit B. factor agreement C. cash flow conversion D. renewable income option

Answer 1

Answer: LINE OF CREDIT

Explanation: Line of credit can be defined as the credit source to individuals, banks and governments that is offered by banks. Under this method the bank agrees to borrow money to a certain amount and the borrower has to pay interest on the amount borrowed.

In the given case, the manager has negotiated a certain level of borrowing limit hence it is definitely a line of credit.