D. Short-run financial risk is defined as temporary price changes which result directly
from natural disasters, such as tornadoes, droughts, and floods.
E. Thus far, hedging techniques have been unsuccessful in reducing short-run financial
Cow Chips, Inc., a large fertilizer distributor based in California, is planning to use a
lockbox system to speed up collections from its customers located on the East Coast. A
Philadelphia-area bank will provide this service for an annual fee of $25,000 plus 10
cents per transaction. The estimated reduction in collection and processing time is one
day. The average customer payment in this region is $8,200. Treasury bills are currently
yielding 5 percent per year. Assume a year has 365 days. Approximately how many
customers each day, on average, are needed to make the system profitable for Cow
The primary difference between a line of credit and a revolving credit arrangement is
A. type of collateral used to secure the loan.
B. length of the credit period.
C. fact that the line of credit is a secured loan and the revolving credit arrangement is
D. fact that the line of credit is an unsecured loan and the revolving credit arrangement
E. classification as either a committed or a noncommitted loan.