When company engages in the practice of factoring

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Reference no: EM131891510

1. Modos Company has deposited $2,000 in checks received from customers. It as written $1,400 in checks to its suppliers. The initial balance was $400. If $1,600 of its customers checks have been cleared but only $600 of its own, calculate its float.

A. $200

B. $400

C. $300

D. $700

2. When a company engages in the practice of factoring its accounts receivable, it

A. sells its accounts receivable at a mark-up over stated (face) value.

B. pledges its accounts receivable as collateral for a loan.

C. sells its accounts receivable at a discount in order to generate immediate cash.

D. buys accounts receivable at a premium from a factor.

3. Holland Construction Co. has an outstanding 180-day bank loan of $400,000 at an annual interest rate of 9.5%. The company is required to maintain a 15% compensating balance in its checking account. What is the effective interest rate for this loan?

A. 11.18%

B. 19.00%

C. 22.35%

D. 8.08%

Reference no: EM131891510

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