Q2. When offering loans to small firm, the lenders normally will require the company share of the small firm as a collateral of the loan. That means, if the firm defaults in the payment of loan, the share ownership of the small firm will be transferred to the lender. Explain the reasons for the lender in setting this requirement. Also illustrate the advantages it may have if the ownership of the firm is in the form of corporation.
Q2. When offering loans to small firm, the lenders normally will require the company share of the small firm as a collateral of the loan. That means, if the firm defaults in the payment of loan, the share ownership of the small firm will be transferred to the lender. Explain the reasons for the lender in setting this requirement. Also illustrate the advantages it may have if the ownership of the firm is in the form of corporation.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Q2. When offering loans to small firm, the lenders normally will require the company
share of the small firm as a collateral of the loan. That means, if the firm defaults
in the payment of loan, the share ownership of the small firm will be transferred
to the lender. Explain the reasons for the lender in setting this requirement. Also
illustrate the advantages it may have if the ownership of the firm is in the form of
corporation.
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