Which one of the following statements is correct?
A) A farmer generally uses a type of financing that employs trust receipts to provide financing during the growing season.
B) A third-party inventory manager is generally involved with the lender and the borrower in a floor plan arrangement.
C) A drug store is more apt to have a financing arrangement involving trust receipts than one involving a general security agreement.
D) Floor plan arrangements are most applicable to large, easily identifiable types of inventory.
E) A direct loan from a bank is generally less expensive than a loan involving commercial paper.

Question

Quizplus · Accepted Answer

Floor plan arrangements are specifically designed for large, easily identifiable types of inventory, such as vehicles, heavy machinery, or appliances. These arrangements allow dealers to have inventory on their showroom floors that they have not yet purchased, with the financing provided by lenders. The inventory serves as collateral for the loan, and as each piece is sold, the loan associated with that piece is repaid. This is particularly applicable to large items that can be individually tracked and sold.

Which One of the Following Statements Is Correct