Question

Mario's Italian Gardens, an authentic Italian restaurant in suburban Chicago, worked with a local bank for a ________. This unsecured source of funds was available for Mario to tap into if he needed immediate funds for the business. He liked the fact that he had a cushion and only used it if he fell short of funds.a) revolving credit agreement
b) promissory note
c) sponsored trade credit
d) line of credit

Answer 1

Answer:

d) line of credit

Explanation:

A line of credit is an agreement between a borrower or customer and a lender, probably a bank. In the agreement, the bank allows the customer access credit funds anytime up to a specified agreed limit. The customer withdraws only the amount they require at a particular moment until they reach the loan limit. In an open line of credit, the customer can borrow again if he makes some repayments.

The local bank has given Marco access to unsecured funds anytime they need it. The bank and Marco have signed for a loan agreement known as a line of credit.

Answer 2

The answer is D.  line of credit

Further Explanation

Banks are financial intermediary institutions that are generally established with the authority to accept deposits, lend money, and issue banknotes, known as paper money. The word bank comes from the Italian language Banca which means a place to exchange money. Whereas according to banking laws, banks are business entities that collect funds from the public in the form of deposits and distribute them to the public in the form of credit and or other forms to improve the lives of many people. The banking industry has experienced major changes in recent years. This industry has become more competitive due to the deregulation of regulations. At present, banks have flexibility in the services they offer, the location in which they operate, and the rates they pay for depositors' deposits.

Credit agreement/loan agreement is an agreement between the bank and a third party, in this case, the customer. Credit agreements can be compared to accounts receivable agreements. The difference is, the term credit agreement is generally used by banks as creditors, while loan agreements are generally used by the public and are not related to banks.

Credit Classification

Credits can be classified into various categories. The types of credit viewed from their objectives can be distinguished as follows:

• Consumer credit is credit given to obtain/buy goods and other consumptive needs.
• Productive credit namely credits given to facilitate the production process.
• Trade credit, which is a credit granted to buy goods for resale, consists of domestic and foreign trade credit.

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Details

Grade: High School

Subject: Business

keywords: Banks