c. asset-based

d. term

ANS: D PTS: 1 DIF: Difficulty: Moderate

REF: p. 325 OBJ: LO: 12-4a NAT: BUSPROG: Analytic

STA: DISC: Finance KEY: Bloom’s: Application

29. Small firms frequently run into problems when:

a. they offer equipment as collateral for a term loan.

b. they under-utilized the equipment purchased with the loan.

c. they overestimate the cash inflows from the equipment purchased with the loan.

d. they fail to match a term loan’s payment terms with the expected cash inflows from the

equipment purchased with the loan.

ANS: D PTS: 1 DIF: Difficulty: Moderate

REF: p. 325 OBJ: LO: 12-4a NAT: BUSPROG: Analytic

KEY: Bloom’s: Analysis

30. Granville owns a construction company and would like to purchase a mobile construction office. The

bank would likely offer him a _____ mortgage.

a. chattel

b. real estate

c. revolving

d. term

ANS: A PTS: 1 DIF: Difficulty: Moderate

REF: p. 325 OBJ: LO: 12-4a NAT: BUSPROG: Analytic

STA: DISC: Finance KEY: Bloom’s: Application

31. If Joan is applying for a loan for a shelving system to improve her retail sales where the system will

serve as collateral, what type of loan would be the most appropriate?

a. chattel mortgage

b. line of credit

c. real estate mortgage

d. term loan

ANS: A PTS: 1 DIF: Difficulty: Moderate

REF: p. 325 OBJ: LO: 12-4a NAT: BUSPROG: Analytic

STA: DISC: Finance KEY: Bloom’s: Analysis | Bloom’s: Application

32. In his presentation to his banker when he applies for a business loan to purchase additional equipment,

Alan should emphasize:

a. how much profit the new equipment will, generate.

b. how he will be able to repay the principal of the loan.

c. how energy-efficient the new equipment is.

d. how much income he will generate for the bank.

ANS: B PTS: 1 DIF: Difficulty: Moderate

REF: p. 326 OBJ: LO: 12-4b NAT: BUSPROG: Analytic

KEY: Bloom’s: Application

33. When considering a loan application, bankers will consider:

a. the credit score of the applicant.

b. the four Cs of credit

c. the five Cs of credit.