Question

When a lender seeks collateral for a loan it can use almost any asset as security, but prefers ______ when seeking tangible security and may insist that it be stored in a public warehouse with the lender keeping the warehouse receipt.

A) Real Estate
B) Inventory
C) Accounts Receivable
D) Cash

Answer 1

The lender prefers inventory as collateral for a loan and may require it to be stored in a public warehouse with the lender keeping the warehouse receipt.

Step-by-step explanation:

When a lender seeks collateral for a loan, it can use almost any asset as security. However, the lender prefers inventory when seeking tangible security and may indeed insist that it be stored in a public warehouse with the lender keeping the warehouse receipt. The correct answer is B) Inventory. Collateral is something valuable, often property or equipment, that a lender has a right to seize and sell if the borrower does not repay the loan. With inventory as collateral, the lender has an assurance that there is a tangible asset that can be liquidated to recover the loan amount if necessary.