PFIN (with PFIN Online, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
6th Edition
ISBN: 9781337117005
Author: Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher: Cengage Learning
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Chapter 7, Problem 1LO
Summary Introduction
To discuss: The consumer loan and its different types.
Expert Solution & Answer
Explanation of Solution
There is a loan that is taken by people to buy the really costly products and they cannot buy those products from their normal income and this type of loan is considered as a consumer loan. This loan is taken to accomplish a long-lasting goal such as funding education fees, purchasing products, or some non-durable products such as funding expensive vacations. Consumer loans have a formal process and also considered as a contract with negotiation under which the borrowing terms and the schedule of the repayment are specified.
Major types of consumer loans
- Auto loans: This type of loan is taken for vehicles such as financing of SUV, car, truck, etc. With this type of loan, approx.80% of the cost of a vehicle can be financed. It is a type of secured loan as collateral is given against the loan.
- Loans for durable goods: This type of loan is taken to finance some costly products such as TV, computer, mobile, etc. The maturity of this loan depends on the type of product purchased from the loan.
- Consolidation loans: This type of loan is taken to repay another credit. This type of loan helps in handling an unhealthy credit situation of a person.
- Education loans: A consumer loan is also taken for the funding of education. This type of loan can be taken by the students as well as parents of the students.
Other types of consumer loans based on repayment of the loan
- Single-payment loans: In this type of loan, the principal and interest amount is paid after a certain period as a lump-sum amount. This type of loan is taken by people to avoid installment based loans.
- Installment loans: In this type of loan, the amount is paid in a series in which a fixed amount is paid on the predetermined dates instead of paying the lump-sum amount.
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Ned's Co. has an average collection period of 45 days and an operating cycle of 130 days. It has a policy of keeping at least $10 on hand as a minimum cash balance, and has a beginning cash balance for the first quarter of $20. Beginning receivables for the quarter amount to $35. Sales for the first and second quarters are expected to be $110 and $125, respectively, while purchases amount to 80% of the next quarter's forecast sales. The accounts payable period is 90 days. What are the cash disbursements for the first quarter?
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Liberal credit terms for customers is associated with a restrictive short-term financial policy.
Question 3 options:
True
False
Chapter 7 Solutions
PFIN (with PFIN Online, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
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